Ford Shares Face Key Test on the Charts After Profit Drop

Ford shares are lower after the car maker posted weaker-than-expected earnings. Here's the key support level to watch in Ford stock now.
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While the stock market continues to motor higher, it’s doing so without Ford  (F) - Get Report, which is down almost 10% after the car maker posted disappointing quarterly results.

The Dearborn, Mich., company reported fourth-quarter earnings of 12 cents a share, missing expectations by 5 cents. Automotive revenue of $36.7 billion fell 5.2% from a year earlier but beat expectations by more than $400 million.

And management provided a soft outlook for fiscal 2020. Ford expects earnings before interest and taxes of $5.6 billion to $6.6 billion for the year, with the midpoint of $6.1 billion coming up short of the $7.4 billion consensus estimate.

Not helping Ford’s stock price is the stable reaction in General Motors  (GM) - Get Report - about flat on the day - after its quarterly report and the explosive gains over the past few months in Tesla  (TSLA) - Get Report.

Let’s look at the charts, as Ford stock faces a critical test of support.

Trading Ford Stock

Weekly chart of Ford stock.

Weekly chart of Ford stock.

Ford stock was actually looking pretty good ahead of the report. 

On the weekly chart above, one can see how the stock had reclaimed its 10-week, 50-week and 100-week moving averages. It was also pushing toward the December high. Had Ford reclaimed this mark, the shares could have rallied toward $10 and possibly higher.

Instead, the stock is being beaten down.

Blowing through all the major moving averages it just reclaimed, Ford stock is being hit hard. The quarterly results weren’t all that impressive, but bulls might have had a better chance to buoy the share price had the guidance been better.

Now that we know management isn’t looking for a very good year, it gives investors little motivation to step in on this dip.

With the shares hovering near $8.25, the stock faces a critical test. 

If this support zone fails to boost Ford, the shares could be headed for $7.50 or worse. If $7.50 fails to support Ford, its December 2018 lows below $7 could be on the table, particularly if we get a correction in the broader market.

On the flip side, say $8.25 holds as support. In that case, look to see how Ford stock does with its major moving averages again. On a rebound, I suspect these metrics will act as resistance. Above them puts downtrend resistance on the table (blue line).