Ford Breaks Bullishly From This Pattern, Charges Toward Resistance: Here Are The Levels To Watch

Ford Motor Company F was popping up about 1.6% higher on Wednesday, in tandem with the S&P 500, which was trading about 0.5% higher in the afternoon after a volatile start.

With cooperation from the general market, Ford broke up from a four-hour bull flag. 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 downwards 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.

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The Ford Chart: Ford’s bull flag was formed between Dec. 28 and Tuesday, with the pole formed during the first eight trading days of that time frame and the downward sloping flag printed between Monday and Tuesday. On Wednesday, Ford gapped up above the upper trendline of the flag formation, which caused a bullish break of the pattern.

• The measured move of the bull flag is about 18%, which suggestes Ford could surge up toward the $14 mark in the future. It should be remembered, however, stocks never move in one straight line, up or down, for a long period of time.
• Ford is trading in an uptrend, which was confirmed on Tuesday with a lower high of $12.50. On Wednesday, Ford printed a higher high but eventually the stock will pull back to print its next higher low, which could give bullish traders a solid entry point.
• On Wednesday, Ford was attempting to break up above the 50-day simple moving average (SMA), but rejecting and wicking from the level. If Ford eventually busts up through that area, bullish traders will want to see the stock eventually regain the 200-day SMA, which would indicate Ford is in a bull market.
• Ford has resistance above at $13.55 and $14.34 and support below at $12.79 and $11.99.

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