If you are looking for an economically sensitive stock, look no further than Ford (F). The European crisis coupled with global economic fits and starts have hit the stock hard. And from a technical perspective, Ford is reaching a critical juncture.
On the weekly bar chart below, a fairly symetrical, yet right leaning bearish head and shoulders pattern has formed over the past two and a half years. The neckline “band” (dotted below) should be supportive near term and assist Ford “longs” in defining their risk. Note that because this is a weekly chart, I created a support band consisting of weekly closing prices AND intra-week prices.
This pattern should be respected, though, as a sustained move below the lower band of the neckline would trigger the bearish pattern and portend much lower prices. But for now, it’s just another pattern worth watching… especially if you have a vested interest in the stock.
On a fundamental level, Ford analysts have been dropping earnings estimates steadily over the past few months as fears of slower global economic growth continue to weigh on the stock. Yet, even with this in mind, estimates are still calling for a pickup in earnings and revenue growth next year. As such, Ford’s forward P/E is just 5.80. When married up with global economic indicators and technical analysis, it is clear that the stock is moving in lockstep with the fits and starts and fears and whims of a global fiscal cliff.
Although better sentiment and stronger economic numbers may be a cure for what ails Ford, it is important to note that stocks typically price in what is known or foreseeable 6 months out… and right now, time and price have their technical eyes on the neckline support zone. You should too.
No position in any of the securities mentioned at the time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.