Ford Stock Attempts Another Break From Long-Term Pattern: Is A Long Run Higher Ahead?

Ford Motor Co F was trading over 3% higher on Wednesday after being knocked back into a weekly bull flag on Dec. 13, which likely trapped some traders when the pattern appeared to break bullish on Dec. 10.

On Tuesday, Ford told Benzinga it is experiencing high demand for its E-Transit and F-150 Lightning Pro commercial electric vehicle models and expects them to sell out quickly when they hit the ground next year. The vehicles will be delivered through Ford Pro, which is a separate unit of the company aimed squarely at commercial customers.

Ford’s stock has been on a tear since late September after breaking up from a descending trendline. Between Sept. 22 and Nov. 9, the legacy automaker turning EV producer’s stock soared almost 60% to reach a high of $20.51. Since the date, Ford has entered into a weeks-long period of consolidation, trading mostly sideways between the Nov. 9 high and a lower support zone at the $18.99 mark.

The stock may need time to consolidate further but if the weekly bull flag pattern is still in play, Ford could be in for another monster run north especially if the general market gets a “Santa Claus rally” this year.

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The Ford Chart: After reaching the Nov. 9 high, Ford entered into consolidation to cool down its relative strength index (RSI), which had been running hot between the 70% and 82% levels for a number of weeks. When a stock’s RSI reaches or exceeds the 70% level it becomes overbought, which can be a sell signal for technical traders.

On Dec. 10 and Dec. 16, Ford broke up from its bull flag pattern on the weekly chart but each attempt ended up being a bull trap. The pattern is still in play, however, because the stock has not lost support of the eight-day EMA on the same timeframe.

On Wednesday, Ford was testing the upper descending trendline of the flag formation as resistance. If Ford is able to break up through the flag and bullish momentum comes in to confirm the breakout, the measured move is about 58%, which indicates Ford could trade up toward the $29 level in the future.

There is a gap below on Ford’s chart that may concern bullish traders because gaps on charts fill about 90% of the time. As the top of the gap is over 20% lower than Ford’s current share price, it may be some time before that occurs, however.

On Wednesday, Ford regained the support of the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA is trending above the 21-day, both of which are bullish indicators. Ford is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

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• Bulls want to see big bullish volume come in and break Ford up from the bull flag pattern again and for bullish momentum to carry the stock up above the Dec. 10 high-of-day, which will confirm the break from the pattern. Ford has resistance above at $20.51 and $21.69.
• Bears want to see big bearish volume come in and drop Ford down to lose support of the weekly eight-day EMA, which would negate the bull flag. There is support below at $18.99 and $17.19.

Photo by Dave Parker via Wikimedia.