GE Aerospace Nears All-Time High as Institutions Pile in
GE Aerospace could be preparing for a breakout.
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Have you ever felt as if you should buy a stock, but you hesitated? Maybe you wanted to understand the story behind the stock before you pulled the trigger.
That’s normal human behavior, but it can be costly. We all love a good story, but that story shouldn’t be our only focus.
How many investors missed out on Palantir PLTR because they didn’t understand the story behind the company? In a bull market, we have to be willing to believe what our eyes can see, and worry a little less about the reasons why.
Powering Up
GE Aerospace GE is a good example of this phenomenon. When I wrote about the stock four months ago, no fundamental thesis was given — I simply noted that the stock continued to climb while the market pulled back. Since that April 18 article appeared, GE Aerospace has gained nearly 50%.
What’s the GE story? There are many positives at work.
For example, Korean Air just ordered 103 Boeing BA aircraft. That’s great news for Boeing, but also for GE Aerospace, which manufactures the engines on those planes. Also, GE Aerospace will be the main contractor on a $1.85 billion dollar deal between the U.S. and Poland, supporting that country’s F-35 aircraft.
Let’s Go to the Chart
Like the major indexes, GE Aerospace remains tantalizingly close to its all-time high, standing less than 3% away from uncharted territory. The stock’s bullish trend remains intact, as GE maintains its position above its 50-day (blue) and 200-day (red) moving averages.
GE has been consolidating for the past month (shaded yellow). These consolidations tend to follow the prior trend. The path of least resistance for this stock is higher.
Notice how the stock’s volume has dropped sharply during this period of consolidation (shaded green). This is classic price action during a consolidation. Traders will be looking for a high-volume breakout from these doldrums.
Only the Strong Survive
When a stock demonstrates relative strength, it’s usually because the stock is being bought by institutional investors. Institutions can’t help but move the market. You and I simply don’t have that power.
There have been exceptions, most notably in meme stocks like GameStop GME and AMC Entertainment Holdings AMC. But the unusual set of circumstances that led to those gains, which occurred during a pandemic, are unlikely to be repeated anytime soon.
The Bottom Line
When a stock is outperforming the major indexes, you don’t always need to know the reason why. You only need to understand that institutions are buying, and they tend to be right. Always assume they know something that you don’t know, because it’s nearly always true.
At the time of publication, Ponsi was long GE, PLTR and BA.
