How to Trade Ford Ahead of Earnings

Ford is trading higher ahead of earnings but is below its quarterly pivot at $5.61.
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Ford  (F) - Get Report is scheduled to report earnings after the closing bell Tuesday.

The automaker said earlier it would resume production in Europe on May 4 and in the United States on May 18. The stock is trading higher pre-earnings but is below its quarterly pivot at $5.61.

Analysts expect Ford to earn 4 cents share for the quarter ended in March, down from 44 cents or the same quarter in 2019. 

Back in September, Moody’s cut Ford's credit rating and downgraded its bond rating to junk status. 

The stock has a p/e multiple of just 3.99 and no longer offers a dividend, according to Macrotrends.

Ford’s F-Series pickup trucks have been the top-selling truck in America for 43 consecutive years. 

Both Ford and its Lincoln luxury division are ranked in the top five of the 2019 J.D. Power U.S Initial Quality Study, which measures vehicle reliability and longevity.

The Daily Chart for Ford

Daily Chart for Ford

Daily Chart for Ford

Courtesy of Refinitiv XENITH

The daily chart for Ford shows the formation of a death cross on October 2 when the 50-day simple moving average declined below the 200-day simple moving average indicating that lower prices would follow.

The 200-day SMA was tested at $9.37 on December 17 as an opportunity to sell the stock.

The stock gapped below its 50-day SMA on February 5 which accelerated the downside to the March 23 low of $3.96.

The quarterly risky level at $5.61 was tested on April 9 and it is the key level to take out on a positive reaction to earnings. This lines up with the 50-day SMA at $5.65.

The monthly and semiannual risky levels are $6.19 and $7.58, respectively.

The Weekly Chart for Ford

The Weekly Chart for Ford

The Weekly Chart for Ford

Courtesy of Refinitiv XENITH

The weekly chart for Ford Motor is negative but oversold with the stock below its five-week modified moving average of $5.54. 

The 200-week simple moving average or “reversion to the mean” is at $10.33. The stock has been below this key moving average since the week of Dec. 11, 2015 when the average was $14.20.

The 12x3x3 weekly slow stochastic reading is projected to rise to 19.43 this week up from 17.16 on April 24. 

At the March low this reading was below 10.00 which made the stock technically to cheap to ignore.

Trading Strategy: Avoid Ford if it breaks below $5 a share as that could result in margin call selling. Sell strength to its monthly and semiannual risky levels at $6.19 and $7.27, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the March 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.