In the week ended October 5, Harley-Davidson (HOG) stock fell 3% compared to a 1% fall in the S&P 500 index. Last week, automakers (XLY) Ford (F), Honda (HMC), and Fiat Chrysler (FCAU) fell 1.4%, 4.1%, and 0.7%, respectively.
The third quarter was the only quarter so far in 2018 that HOG stock has risen. In the third quarter, the stock rose 7.7% after falling 17.3% in the first half of 2018.
Key technical levels
Despite a 7.7% recovery in HOG stock in the third quarter, its price trend is still reflecting a weakness since it hasn’t yet violated an important resistance near $46. Its 14-day RSI (relative strength index) level was below the line of equilibrium at 43.7, reflecting a negative bias in momentum. On the downside, $42.70 should act as an immediate support level, followed by a key support near $41.10.
The stock was trading close to its 50-day SMA (simple moving average) of $43.71, confirming a mixed bias in the price trend.
At the end of the second quarter, Harley-Davidson stated that “EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%.” It added that “these tariffs will result in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.” If the company passes on the extra cost burden to consumers, its already weak European sales could weaken more.
To avoid high tariffs, the company decided to shift the production of motorcycles made for the European market from US factories to international factories. The move didn’t sit well with President Donald Trump, who warned HOG on Twitter that if it moves production to another country, it “will be taxed like never before!”
Harley is expected to report its third-quarter results on October 23. Analysts expect its adjusted earnings to grow 10.8% year-over-year to $0.44 per share.
To learn what’s ahead in the markets in October, read Market Realist’s October Should Be Full of Thrills and Chills.