Is Ford About to Break Out Higher?

Ford remains rangebound, but the potential for an upside resolution is growing stronger.
By Gary Morrow ,

Shares of Ford (F) - Get Report are trading just below a major resistance area. A clear break through this key zone, which has held the last two monthly highs in check, could spark a powerful rally. As of Monday's close, Ford remained range-bound, but the potential for an upside resolution is growing stronger.

Ford has been struggling since its late-April failed breakout. Back on April 28, investors drove shares over 3% higher on the heaviest upside trade since early 2013. This powerful earnings-inspired breakout pushed the stock well past its declining 200-day moving average, setting the stage for a fresh bull run. Unfortunately for Ford investors, the rally never materialized, and within a few days, the stock was back below the 200-day after leaving behind an ominous failed breakout.

From the start of May till the onset of Brexit fever, Ford had been trading in a sideways consolidation as overhead pressure grew. The two-day Brexit selling wave, which drove the stock well below the April low, appeared to be a sign that an important top was in and shares would need a deep pullback before recovering. Instead, Ford, along with the major indices, regained its footing rather quickly and is now on the verge of a breakout.

In the near term, Ford investors should keep a close eye on the July high of $13.55. A clear take out of this level will violate a heavy overhead trend line that links multiple weekly highs of May and June. Once this hurdle is cleared, Ford appears to have enough momentum in place to make a run at the April 28 spike high. Adding a spark to a breakout is a fairly high short interest ratio of 5.65.

Prior to this scenario, Ford remains in a fairly low-risk buy zone. Patient investors should consider the stock a buy between last week's high of $13.17 and $12.80. A close back below last week's low of $12.20 would indicate that more basing will be needed before fresh rally can begin.

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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long Ford.

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