Tomahawk, WI 9/03/2013 (BasicsMedia) –  General Electric Company (NYSE:GE) (Closed: $23.14, Up: 0.13%) opened gap up on the news of the company trying to exit its U.S. retail lending business but the joy was short lived as it faced good selling at the higher levels. The day’s price action created a long red candle, obviously not a thing a bull would like to see. The fall from the top of $24.95 completed its sixth week now and on Friday the stock hit a new low at $23.04. The volume at 46 million was way higher than the average volume of 36 million.

The period of 1988 – 2000 was a golden period for the stock as it marched to $60.75 from its 1988 low of $3 in an uninterrupted fashion. A huge bull market like this warrants a proportionate correction and when the bear market of 2000 – 2002 made the stock to lose about 2/3rd or 66% of its value, it looked like a very fair example of that. But the next rise in the bull market of 2003 – 2007 took place in 3 waves, implying that it was nothing more than a corrective rally and could manage to retrace only just a bit over 50% of the entire fall. The crash of 2007 – 2008 took the stock from $42 levels to below $6 swift, a level last seen in 1992. Almost all the gains were lost. The latest attempt to recover has begun from the 2009 bottom of $5.73, which has taken the stock to a high of $24.95 so far.

There are a few similarities between the two rallies in this bear market since 2000. Both the current rally from the 2009 bottom and the rally of 2003 – 2007 are subdivided in 3 waves. The durations of both the rallies are very close to equal. The earlier rally topped out just over the 50% retracement level of the previous fall. The current rally has retraced exactly the same so far and is showing topping out signs even if not confirmed totally.

These points give birth to a speculation that the entire fall might be taking the form of a Triple Corrective. The earlier rise was an X wave and so is the current one. It would imply that another major down leg is pending after this rise tops out. Another possibility would be that a Triangle is in the process of making and the current rally is the B wave. In that case, we can expect two more gradual drops and a corrective rally before a real sustainable bull market begins.

We can see a Rising Wedge formation in the charts which is a terminal pattern. But we need more confirmation before we can fully exit the stock. The stock has a tendency to rise after falling for 6-7 weeks. So we can expect a short term rally if the $22 – $22.50 zone is protected. The indicators are still showing appropriate signs of a bull market but a break of 45 -50 levels in the weekly RSI would mean danger for the bulls.

Investors could exit the stock or at least book some profit if it breaks and sustains below the $22 – $22.50 levels.

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