Tuesday, 21 March 2017

F - driving off a cliff

Whilst the main market saw significant weakness, there was rather powerful downside in Ford Motors (F), which settled -4.3% to $11.75. The loss of the 200dma is important, and does bode for further weakness to the lower end of the price cluster zone to around $11.60.

F, daily

F, monthly


Today's third consecutive significant net daily decline is the most bearish price action since July/Aug'2016. Ford is still unable to break the declining trend/resistance that stretches back to summer 2014.

Today's big drop was unquestionably partly due to sig' weakness in the main market. However, the loss of the 200dma is a major problem... with Ford seemingly now set for the mid $11s before a chance at stabilising.

Rising rates a problem?

Something to consider... Ford is seen (by myself included) as an attractive stock because of its yield... roughly 5%.

US Int' rates are in the process of rising from effectively zero to a probable 2% in spring 2018. By definition, that makes Ford's yield 2% less 'relative' to other things. That 2% drop on 5% to 3% is a reduction of FORTY percent. The argument could be made that 'all else being the same'... Ford should be in the $8s.. or even 7s in the first half of next year.

Multi-year downward trend

Price action since summer 2014 has been broadly bearish, with Ford repeatedly unable to clear declining trend. Right now, that is around the $13.00 threshold.

For the 'conservative bullish chasers', there is clearly no hurry to get involved until we see some price action in the $13.00s. For the record, I'm still leaning on an eventual bullish breakout, but its taking much longer than expected.