Don't Expect Ford's Stock Price to Recover Any Time Soon; Here's Why
Ford (F) - Get Report earnings were not good and the stock is getting hammered. The company reported earnings before the open on July 28. Earnings-per-share came in at $0.52 versus expected levels of $0.60. As a consequence, the stock price fell about one point in a one-day gap. Does this foretell a bounce? The chart shows why this is not necessarily so in this case.
The largest volume spike in six months often is seen as a strong signal for reversal. Momentum plunged from near the 70 (overbought) level, to just below 40, as measured by Relative Strength Index (RSI). And of course, the gap in price was large, one full point on a chart scaled at only 4 points.
However, based on estimated support at about the closing price of the stock, does this price pattern forecast a bounce to the upside? Not necessarily. The current price level of about $12.70 per share has held since mid-April with the exception of the big price drop associated with the Brexit vote. Even with the price drop, the closing price on Thursday appears to be a reasonable trading level, considering the severe earnings weakness and overall state of U.S. auto manufacturing in recent years.
There could be a bounce up just for technical reasons. So the price could rebound within a one-quarter point range, but don't expect much more. Also, don't be surprised to see the price weaken at this point and perhaps even decline further, perhaps down to levels of February when trading was between $10 and $12 per share.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Besides blogging atTheStreet.com,Michael Thomsett alsoblogs at theSeeking Alphaand several other sites.He has been trading options for 35 years. He also teaches on the Candlestick Forum website. To check membership, go to Candlestick Forum membership. His new book can be viewed at tinyurl.com/z44kzlu