Wednesday, February 17, 2010

"Are General Electric Co. Shares Range-Bound?" (GE)

The stock is up 9 cents at $16.13.
This piece from Schaeffer's Research is a few weeks old but seems more probable after the recent decline than it did on January 25 at $16.37 on it's way to $15.25:

While the General Electric Co. (GE: sentiment, chart, options) topped Wall Street quarterly earnings estimates last week, many analysts feel the company is no longer a good investment. Specifically, Dilip Sarangan, research analyst at Frost & Sullivan, feels that traders should avoid the Dow Jones Industrial Average (DJIA) component, according to a recent interview with

"Traditionally, it used to be a good investment because of the dividends. But now with what's been going on in the past 18 months or so, it's no longer a good investment, nor is it going to be one of the stocks that will grow," Sarangan told CNBC. "Compared to a lot of the other Dow components, they're definitely stinking it up."

Contrarian Takeaway:

Sarangan is not the only analyst betting against GE, as 10 of the 18 brokerage firms following the shares rate them a "hold" or worse, according to Zacks. However, the negativity surrounding the security ends with the analyst community. Specifically, options traders' preference for calls over puts has allowed GE's Schaeffer's put/call open interest ratio (SOIR) to plunge from an annual high of 1.72 on Sept. 18, 2009, to its current perch at 0.94 in the 29th percentile.

What's more, data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) support this shift toward optimism among speculative investors. Currently, GE's 10-day ISE/CBOE call/put volume ratio of 2.10 indicates that calls bought to open have more than doubled puts purchased during the prior two weeks. This ratio also ranks above three quarters of all such readings taken during the past year, meaning that GE options traders have rarely scooped up calls at a faster pace in the prior 52 weeks....MORE