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What Does a Technical Analysis of Ford’s Stock Suggest?

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Ford Motor Company

Previously, we looked at how Ford Motor Company’s (F) valuation multiples could move higher or lower in the coming quarters based on various internal and external factors. Currently, Ford’s valuation multiples are higher than those of other auto giants (IYK), including General Motors (GM) and Fiat Chrysler (FCAU).

While valuation multiples can help investors make decisions, it’s also important to look at key technical support and resistance areas. These support and resistance areas may be considered ideal entry or exit price levels for investors. Let’s take a look at what a basic technical analysis of Ford’s stock suggests for the short term.

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Key technical levels

In our 1Q16 earnings preview series for Ford Motor Company, we noted that Ford’s price is trading within a descending price channel. The upper range of this downward-sloping channel was near $14.35 and acted as a good resistance. The stock price moved upward in the last couple of weeks and posted a high of $14.22. However, the price was unable to sustain this level and turned downward once again.

As of May 2, 2016, Ford’s stock was at $13.62. A violation of its immediate resistance of $13.65 may confirm the strength of the bulls against the bears.

On the lower side, the company’s immediate support level was unchanged at $12.50, followed by a key support level of $11.35.

Note that an upward price movement may see resistance around resistance levels, and a downward price movement may hit a roadblock around support levels.

However, a breach of support or resistance may trigger a sharp price action. This means that the price may witness a sharp rally if a key resistance area is violated and a sharp fall if a key support level is violated. In both cases, investors could initiate favorable positions or manage their existing positions to benefit from these price levels.

Directional bias

Based on the three trends cited in the Dow Theory, Ford’s stock is trading with a primary upward trend and an intermediate downward trend. Note that intermediate trends can continue to progress for the short to medium term, while primary trends remain intact for the long term.

US electric vehicle maker Tesla Motors (TSLA) is releasing its 1Q16 earnings on May 4, 2016. Auto investors can read what analysts have estimated for Tesla’s 1Q16 earnings in Can Tesla Put It in High Gear after 1Q16?

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