Skip to main content

Will Ford Retest the March Lows on Second Coronavirus Wave?

Ford came under pressure Monday as fears for a second wave of coronavirus continue to mount. Let's take a closer look at the stock now.

Ford  (F) - Get Ford Motor Company Report was about flat in Monday’s session, but the stock is up notably from its initial losses as it opened lower by more than 4%.

The stock market initially opened lower on the day too, with the S&P 500 falling more than 2%. That’s as fears of a second wave of coronavirus continue to make the rounds on Wall Street.

Of course, that’s having an outsized impact on companies like Ford and General Motors  (GM) - Get General Motors Company Report as automakers face a difficult business environment when the economy suffers.

In a recession, consumers may struggle enough to cover bills and put food on the table. With lower working hours and a questionable economic environment, not many are looking to buy new vehicles.

That’s even as Ford will debut its new 2020 Bronco on July 9.

Let’s look at the charts and see what the technicals are saying.

Trading Ford Stock

Daily chart of Ford stock.

Daily chart of Ford stock.

TheStreet Recommends

Amid the recent rally, Ford stock almost filled the first of its two major February gap-downs. That would have required a rally up to $7.90, but shares topped at $7.74 earlier this month, as the 200-day moving average rejected the stock.

There’s a few reasons I don’t think Ford will retest its March lows.

First, it has taken action to bolster its balance sheet and strengthen its financial footing. Second, the market was in full-blown panic mode back in March. Everything from safe-haven assets to equities were selling off with little rhyme or reason. Further, the automaker has already gotten the “bad news” out of the way by halting its dividend payout.

Last but certainly not least, the technicals are better.

Ford stock broke below $4 per share in March, but has since put in a series of higher lows. That’s illustrated on the chart via uptrend support (blue line).

While shares could not reclaim the 200-day moving average, they are maintaining above the 50-day and 20-day moving averages, with the latter acting as support on Monday.

In May the stock broke out over $5.75 resistance, then on a dip, found this former resistance level to be support. That’s a very bullish development. For now, the bulls remain in control and until some of these downside support levels start to break — mainly moving average support, the $5.75 mark and uptrend support — then I believe the risk for a retest of the lows is off the table.

On the upside, see if Ford fills the gap up to $6.75. Above that puts the 200-day moving average back in play.