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Analysis: Ford's Chart Suggests Stock Could Be Headed To $12

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Analysis: Ford's Chart Suggests Stock Could Be Headed To $12

For years, Ford Motor Company (NYSE: F) has been the laggard among the major auto stocks. A post-earnings breakout last month has the stock trading back above $10 for the first time since July 2018, however, and Ford’s consolidation in recent weeks is forming a very bullish chart pattern.

Bottom Finally In?

Ford's stock has been drifting steadily lower for more than five years now, bottoming as low as $7.17 back in December. Since that time, Ford has yet to make a new low.

When the company crushed first-quarter earnings expectations in late April, Ford broke above $9.50 resistance to make its first meaningful higher high on over a year. If the December low is ultimately the bottom for Ford stock, the post-earnings jump may be just the beginning of an extended, multi-year rally in Ford.

Pennant Formation

Since the earnings beat, Ford has been trending mostly sideways in a relatively narrow consolidation channel between $10 and $10.50. The chart below shows how Ford has formed a nearly textbook pennant technical formation, complete with flagpole. When the pennant pattern forms in the middle of a bullish trend, it almost always represents an extended consolidation period prior to the next leg higher for the stock.

As it stands, Ford’s pennant resistance level is around $10.40, and its support is around $10.15. Traders can expect this range to narrow in coming days until the stock ultimately breaks out to new highs or new lows.If an upside breakout occurs on heavy volume, the next technical price target for Ford will be the length of the flagpole “applied to the resistance break or support break of the flag/pennant to estimate the advance or decline,” according to StockCharts.

In Ford’s case, the flagpole extends from around $9 to $10.50, or about $1.50 in magnitude. A $1.50 advance from $10.40 resistance represents a target of around $12, about 14.6 percent upside from Tuesday’s trading level.

Perhaps not coincidentally, the $12 level previously represented resistance for Ford stock on at least three occasions dating back to early 2016.

Levels To Watch

For now, the key level for Ford bulls to watch is the $10.40 to $10.50 range. A significant breakout above $10.50 could mean a test of $12 is imminent.

On the downside, the $10 to $10.15 range is near-term support. A breakdown below $10 would mean the pennant is no longer in play. Potential sellers should be aware Ford could also bounce in the $9.50 to $9.60 range once its post-earnings gap is filled.

Ford's stock traded around $10.20 per share at time of publication.

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