Ford Motor Company (F) hit a two-year high on Wednesday, in a sympathetic takeover bid after last week’s mighty General Motors Company (GM) to burst. The struggling manufacturer has a small stake in electric vehicle (EV) startup Rivian Automotive, which just raised $2.65 billion in funding, adding fuel to the upside. Ford stock, which peaked a decade ago, is now trading above 50 months exponential moving average (EMA) for the first time since a failed effort in early 2018.
Key points to remember
- Ford hit its peak more than 20 years ago.
- The stock entered the first uptrend since 2013.
- Multiple air barriers predict below normal gains in the coming months.
- Intermediate corrections in the leadership of the sector could end the uptrend.
Market wisdom insists that rising seas float all boats in a bull market, and the burning electric vehicle segment of the automotive industry is no exception, with Tesla, Inc. (TSLA) and NIO Limited (NIO) encouraging investors to take a second look at GM in 2020. Those stocks have now outpaced rational valuations, encouraging rotation into less productive and cheaper rivals like Ford. However, latecomers are also the first to roll over during periods of market weakness, indicating high risk in the months ahead.
Ford stock has been added to Deutsche Bank’s list of near-term catalysts, neatly summing up the current lead. The Wall Street consensus on Ford isn’t quite as enthusiastic, with a “Hold” rating based on three “Buy” recommendations, nine “Hold” and one “Sell”. Price targets currently range from a low of $7.10 to a high of $12, while the stock is expected to open Thursday’s session just 60 cents below the target high. This high placement suggests that the rally will quickly run out of steam.
Point
A straggler is an underperforming stock or security relative to its benchmark or peers. A laggard will have below average returns relative to the market. A laggard is the opposite of a leader.
Ford Long Term Chart (1995 – 2021)
TradingView.com
A multi-year uptrend posted an all-time high at $37.41 in 1999, giving way to a pullback that found Support in the low $20s. The stock broke through range support in 2001, entering a strong downtrend that ended in the low single digits in the first quarter of 2003. The subsequent wave of recovery made little headway during the bull market in the mid-decade, recovering less than half the loss, before a near-death spiral in the economic collapse of 2008.
Ford posted a 26-year low at $1.01 and rose into the new decade, stopping at a 10-year high in the upper teens in 2011. This is the highest high in the past 10 years , with breakout attempts from 2013 and 2014 stalling less than a point under resistance. Price action entered a steady decline in the second half of 2014, creating an endless series of lower highs and lower lows, culminating in March 2020 with an 11-year low.
The stock has gained ground at a steady pace since then, surpassing the 2019 high of $10.56 on Wednesday. This is the first high since 2013, signaling an uptrend that now faces multiple levels. resistance. For starters, the upside has just hit the 200-month-low EMA, which has marked resistance since 2016. As a result, the rally could end quickly and be in a trading range between the resistance at $12 and the support at $9.50.
Point
A Trading range occurs when a security trades between consistent high and low prices for a period of time. The top of a security’s trading range often offers price resistance, while the bottom of the trading range usually offers price support.
The essential
Ford has entered a new uptrend, but multiple overhead barriers should limit near-term and intermediate gains.
Disclosure: The author held no position in the aforementioned titles at the time of publication.