Is Ford Headed For A Gap Fill? Here's Why The Stock Could Charge Toward $20

Zinger Key Points
  • Ford has settled into a second consecutive bull flag pattern.
  • If the stock can regain the 200-day SMA, Ford will enter into a bull cycle.

Ford Motor Co F shares are trading higher Thursday after a bullish day in the general markets on Wednesday helped the stock close up over 2%.

The legacy-turning-electric vehicle manufacturer has spent the last five trading days consolidating after a massive six-day post earnings ramp saw Ford soar 26% between July 27 and Aug. 3.

The massive surge coincided with the break up from a bull flag pattern on the daily chart, which Benzinga pointed out just prior to the company’s second-quarter earnings print.

It now appears Ford may be completing a second consecutive flag within a bull flag pattern.

The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.

For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downward within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.

  • Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.
  • A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Ford Chart: Ford appears to be printing another bull flag, with the pole formed between July 27 and Aug. 3 and the flag forming over the days that have followed. If the pattern is recognized, the measured move suggests Ford could surge toward the $20 level.

  • The sideways trading within the flag has helped to cool Ford’s relative strength index (RSI), which had been registering in above 70% since July 27. The stock’s RSI has cooled to about 66%, and although the level is more conformable, continued consolidation within the flag would keep Ford’s RSI from becoming overextended too quickly on a break up from the flag.
  • Ford’s bull flag is taking place about 7% beneath the 200-day simple moving average (SMA). It’s common to see strong consolidation patterns take place under heavy resistance areas, such as the 200-day SMA, and the sideways trading under the area can help a stock gather the power to regain the level as support.
  • If the bull flag pattern is recognized and Ford breaks up above the 200-day SMA, the stock will also be in close proximity to filling an overhead gap that exists between $18.59 and $19.87. Gaps on charts fill about 90% of the time, so it’s likely the stock will rise up to fill the range at some point in the future.
  • Ford has resistance above at $15.51 and $16.45 and support below at $14.34 and $12.79.

Photo via Shutterstock.

Market News and Data brought to you by Benzinga APIs
Posted In: Long IdeasShort IdeasTechnicalsTrading Ideasautoautomotiveelectric vehicles
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!