The stock price of General Electric (NYSE: GE) has seen a 7% rise over the last five trading days, and we believe the stock will likely continue to rally in the near term. The 7% rise can primarily be attributed to the announcement of Airbus accelerating the production of A220 and A350 aircraft in 2022. Boeing is also rumored to accelerate the production of 737 MAX aircraft. General Electric’s Aviation segment, which is involved in making aircraft engines, will benefit from an increase in production of aircraft. It is also the largest segment for the company, accounting for over a quarter of the company’s total sales. The company also plans to retire its notes worth $2 billion to strengthen its balance sheet. GE GE stock was buoyed by these developments.
Looking at the recent rally, the 7% rise for GE stock over the last five days compares with a 1.2% growth seen in the broader S&P 500 index. Now that GE stock has seen a rise of 7% in five trading days, can it continue its upward trajectory, or is a decline imminent? Going by historical performance, there is roughly an equal chance of a rise or fall in GE stock over the next month. Out of 140 instances in the last ten years that General Electric stock saw a five-day rise of 7% or more, 73 of them resulted in GE stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 73 out of 140, or about 52% chance of gain in GE stock over the coming month. See our analysis on General Electric Stock Chances of Rise for more details.
That said, given the current momentum in GE stock, and opening up of economies sooner than expected, and the rise of the vaccination rate, this means that the demand for air travel will likely see a sharp rebound earlier than estimated. This will likely result in continued growth in GE stock in the near term. If Boeing confirms the hike in production, that will be another positive trigger for GE stock.
Five Days: GE 7%, vs. S&P500 1.2%; Outperformed market
(6% likelihood event)
- General Electric stock rose 7.0% over a 5-day trading period ending 6/1/2021, compared to the broader market (S&P500) rise of 1.2%
- A change of 7% or more over 5 trading days is a 6% likelihood event, which has occurred 143 times out of 2516 in the last 10 years
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Ten Days: GE 6.7%, vs. S&P500 0.8%; Outperformed market
(10% likelihood event)
- General Electric stock rose 6.7% over the last ten trading days (two weeks), compared to the broader market (S&P500) rise of 0.8%
- A change of 6.7% or more over ten trading days is a 10% likelihood event, which has occurred 260 times out of 2511 in the last ten years
Twenty-One Days: GE 7.9%, vs. S&P500 -0.1%; Outperformed market
(13% likelihood event)
- General Electric stock rose 7.9% the last twenty-one trading days (one month), compared to the broader market (S&P500) decline of 0.1%
- A change of 7.9% or more over twenty-one trading days is a 13% likelihood event, which has occurred 335 times out of 2500 in the last ten years
While GE stock looks like it can gain more, 2020 has also created many pricing discontinuities that can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Honeywell vs. Roper Industries.