It has been a slow start to the week as the markets recoiled a bit in early morning trading. The day’s headlines have been marked with news of General Electric Company’s (NYSE:GE) dividend cut along with Qualcomm, Inc.’s (NASDAQ:QCOM) rejection of Broadcom Ltd’s (NASDAQ:AVGO) offer to buy the company.
The news of General Electric’s dividend cut begs another review of what the charts are saying about the stock as traders may equate today’s news with a “kitchen sink” moment and start buying. We’ll look at that chart along with the charts for Advanced Micro Devices, Inc. (NASDAQ:AMD) and Ford Motor Company (NYSE:F) as our three big stock charts for Monday.
General Electric Company (GE)
GE’s post-earnings decline has continued as the company’s fundamental outlook remains in question. This morning, the company cut its dividend for the third time in its history as it tried to right its ship. Should traders buy on the news? Let’s look at the chart.
- In our last commentary, we identified the importance of the $20-level, as this price serves as a psychological and chart support level. We expected to see a short-term dead cat bounce that would turn to more selling. This morning’s news is providing the catalyst for that selling, which should increase.
- The oversold signal from GE stock’s RSI still has the potential to help maintain prices close to the $20-mark over the next few weeks, but analyst price downgrades are likely to start hitting the headlines, which will increase selling.
- According to the Chande Trend Meter, GE stock is in a similar situation to October when the stock saw a short-term rally but remained in a bearish trend. As of now, our price target remains at $16.
Advanced Micro Devices, Inc. (AMD)
Semiconductor companies have been one of the leaders in the market this year as innovation and demand for new products are combining for a positive fundamental backdrop for the group. AMD has been one of the exceptions though, as the stock is down 3% year-to-date.
The stock is sitting at a must-win level as it heads into the year-end.
- AMD shares just saw a bearish “death cross” pattern form on the stock. This identifies a worsening trend in the stock’s price and is typically a precursor to continued selling pressure from the technical traders.
- From a round numbered perspective, $11 is an incredibly important price for AMD shares to hold. This price acted as significant support for the stock in May, June and October of this year. A move below $11 will serve as a psychological mark against the stock.
- Looking at the long-term chart, the expected break below $11 will open-up a move to $10.00, which is where the stock’s 20-month moving average resides. We expect to see some long-term buying interest come in at that point, but until then, traders should remain on the sidelines or short AMD stock.