Bullish GE Provides Perfect Conditions for Call Options

Bullish GE Provides Perfect Conditions for Call Options
April 14, 2015

 
General Electric (NYSE:GE), finally managed to surprise and please investors with the sale of GE Capital, its financial lending/leasing division.

The decision is somewhat unsurprising when profitability between different GE divisions is compared. It was rather noticeable that GE Capital was generally lagging behind the other, more “core” GE projects.

Investors seemed to rally behind the announcement as the stock price climbed more than 10% after the announcement, and GE’s management had confirmation that their decision to sell was the correct one. GE earned USD26billion from this agreement, plus stock price was exploding, so what could go wrong?

The technical perspective on the company’s stock price is looking good as well, and this break seems to be higher out of a bullish flag. This pattern is characterized by a series of lower lows that seems to take ages to form, only for a price to explode. Also, such a pattern channels really well, and by the time the upper part of this channel is broken, it usually means that the pattern has completed.

Well, the upper part of the channel is broken with the current news and this turns out into a bullish event for the GE stock price. I am talking about a bullish situation at $28.51, a 5+ year high, but we’re not buying here at higher levels, we’re gaining strength.

The Federal Reserve of the United States still has an important word to say in the overall stock market prices but if the indecision to raise rates stays for much longer, it is inevitable that the stock market will move higher.

June’s meeting should be decisive, and if the Fed is not raising rates at that meeting, we can expect the next “analysis” or evaluation of the whole situation to be at end of 2015.

What I would do with GE, is wait for the month of May, and then buy call options on the pair with one month expiration date, but only half the regular investment.

The next step is to wait for the June Fed meeting and if this one turns out being disappointing for the US dollar, then buy call options again, with one month expiration date as well. This time with the full risk as again, such a move should attract investors into the equity markets. Of course, what company should you buy then? – The one that just restructured and sits on a pile of cash? Maybe… just maybe!

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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