Shares of the luxury performance sports car manufacturer Ferrari (RACE) - Get Report became publicly traded last October and despite their storied racing name proceeded to accelerate lower right from the start. The steady series of lower highs and lower lows took the stock for a bumpy ride from its $52 IPO price down to the $32 February low this year.
This is not performance usually associated with the Ferrari racing name, but the stock looks ready to shift to a higher gear.
Shares did manage to bounce off their low in February and retrace about 50% of the loss as they moved in a lateral consolidation channel, reverting around the 50-day moving average. Last month they broke above the average and an interior downtrend line, continuing higher and taking out channel resistance this month. This price movement propelled the momentum indicators higher, with both the relative strength index and moving average convergence/divergence tracking above their center lines.
In addition, the Aroon indicator, which is designed to identify early shifts in trend, made a bullish crossover. The indicator has oscillated with the channel highs and lows, but this crossover occurred below the 30 level, and the green "up" line quickly accelerated above the 90 level, confirming the channel breakout and suggesting an emerging bullish trend. Volume has surged over the last several sessions, further confirmation of the breakout move, and Chaikin money flow has moved into positive territory, which is a sign the stock is under accumulation.
Both Ford (F) - Get Report and General Motors (GM) - Get Report recently reported sales that disappointed, but Ferrari supercar sales fueled a report that beat analyst expectations. The stock price was down about 1% in after-hours trading on Tuesday, perhaps in sympathy with the other names in the space, but a retracement to channel resistance-turned-support would be a buying opportunity, using an initial stop under the 50-day moving average.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.