Ferrari’s technical analysis
Previously in this series, we explored how Ferrari’s (RACE) valuation multiples are trading higher than those of mainstream automakers (XLY), including those of General Motors (GM), Ford (F), and Toyota (TM). While valuation multiples can help investors, it’s also important to look at key technical support and resistance levels. Investors can use these support and resistance areas to refine their entries and exits from companies’ stocks. Below, we’ll look at some key price levels ahead of its Ferrari’s 2Q16 earnings release.
Key technical levels
On July 18, 2016, Ferrari’s stock price was $42.21. The price is currently confined within a downward channel, as seen in the chart above. The upper range of this channel, near $42.90, is likely to act as an immediate resistance level. Only a breach of this resistance level should confirm underlying optimism and lead to a rise toward the key horizontal resistance level near $45.80.
On the downside, $41.40 should act as an immediate horizontal support level, followed by a stiff horizontal support level of $40.10.
Using technical levels
We should note that rising price movement may struggle around the resistance levels, and falling price movement may hit a roadblock around support levels.
A breach of support or resistance levels may trigger a sharp price action. This means the price may witness a sharp rally if a key resistance level is broken or a sharp fall if a key support level is broken. In both cases, investors could initiate a favorable position or manage their existing position to benefit from these price levels.
For those who are not caught up with Ferrari’s fundamentals and operations, our series titled An Investor’s Guide: Is Ferrari Racing on a Rough Road? offers a complete overview of the company, its recent performance, and its vision.