Dow stock GE is surging, but buyer beware it's still 'the value trap of the century,' says market watcher

GE has gone from worst to first.

The beaten Dow stock fell 41 percent in 2017 but has surged 6 percent in the first few days of the New Year. Despite the bounce, some market watchers are telling investors to not trust the bounce, and to look at the stock with a wait and see approach.

Matt Maley, equity strategist at Miller Tabak, says there is a technical case for a GE bounce, namely that the stock has been forming a base for the past six weeks or so and is approaching its 50-day moving average. But he also warns that the fundamentals behind the rebound don't actually point to a sustainable bounce.

"[GE] was the dog of the Dow in 2017, so it was a big candidate for tax-loss selling," he said Wednesday on CNBC's "Trading Nation." "And now that those sellers have moved out of the way, the stock has popped up a little bit."

"It's not because people are jumping into it," he added. "They think the thing has bottomed, but only because the sellers are disappearing."

In other words, the recent rally in GE could just be an artificial bounce.

Stacey Gilbert, head of derivatives strategy at Susquehanna, echoes Maley's sentiments on the stock. On "Trading Nation," Gilbert called GE the "value trap of the century."

"To me, this activity really looks like investors who don't want to miss a pop if it were to happen," she said. "So I do think that a lot of the performance really is that dead-cat bounce."

"There is activity you can do, certainly in a position for that," she added. "But rallying significantly this year? I don't see it sentiment-wise or even fundamentally."

In the last year, GE has fallen 42 percent and was the worst-performing stock in the Dow in 2017.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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