Monday left growth investors reeling as China's DeepSeek shifted assumptions about the artificial intelligence landscape. Normally, you might think an alternative energy company like GE Vernova would be spared a hit to technology. But many power companies were seen as "AI adjacent" plays. The expected power requirements from semiconductors, data centers and all the infrastructure for AI computational power meant that even slowpoke utilities outpaced many growth names.
Tight Action Setup GE Vernova Entry
We were already familiar with the personality of GE Vernova as we had multiple trades in it that were the topic of a previous column. But the flat-base setup with just a 12% depth tempted us again as it broke through resistance. GEV joined SwingTrader as one of our first trades of the year (1). We started with a full position with the intention of trimming quickly into strength to lock in some profits.
We got that opportunity the next day on a gap up that gave us a 7% profit from our entry (2). A quarter trim allowed us to lock in a healthy profit and give the stock some room to make a larger run.
Over the next few days, GE Vernova filled in its gap shaving our profit in half so we trimmed another quarter as a defensive measure (3). Still, the action was positive overall since on each of the days the stock dropped, it closed in the upper part of its range. That suggests eager buyers waiting in the wings.
A Hold Through Earnings
That proved to be the case and GE Vernova broke out into new high ground (4) and started running up sharply. A few days later, we faced an important decision. The day before its earnings announcement (5) we had two factors that led to us holding through earnings. GE Vernova was up 20% from our entry so we had plentiful cushion and it just broke above a round number of 400.
This Trader Had An Outsized Position In GE Vernova. Here's How Hedging Saved His Trade.
We expected more of an earnings reaction but we still got an extra couple percent and locked in profits on another quarter of the position (6).
The Decision To Sell
At its peak (7), we had a 30% profit on GE Vernova from our entry in just three weeks. Plus, there was a 25% extension from the 50-day moving average line. We didn't want to lose a gain like that so when the stock undercut the low of the prior two days we exited the remaining position (8). It was the chance to lock in the gain and protect our profit that made the ultimate decision.
GE Vernova took a 20% hit at the open on Jan. 27 as AI-related stocks plunged (9). Because we didn't get greedy with our position, we didn't suffer a devastating loss of profits. In fact, we had already rotated to a degree to other areas in retail, medical and software due to how extended AI stocks were.
Normally, the bad break would disqualify GE Vernova from consideration for at least a few months. But this case might offer an exception. When Microsoft CEO Satya Nadella tweeted "Jevons paradox strikes again!" it may have shifted some perceptions on the power needs going forward. It's worth keeping on the radar to see how it plays out.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
