Ford Stock at Cusp of New Uptrend

Ford Motor Company (F) is showing signs of life after a brutal decline dumped the stock to a nine-year low in the single digits at year end. For starters, it held higher ground throughout the first quarter, closing in the upper fifth of the three-month trading range. Selling pressure also dried up during this period while dip buyers took the plunge after accumulation-distribution readings started to deteriorate in March.

The company has dropped into third place in U.S. auto manufacturing, with the current market cap descending to $35.03 billion, lower than Tesla, Inc's (TSLA) $48.82 billion valuation. Of course, Ford sells more automobiles than Musk and Co., but Wall Street is betting that this is going to change in the coming years. General Motors Company (GM) and its massive footprint continue to rule the roost, sporting a healthy $52.74 billion market capitalization.

However, 2019 price action still hasn't set off a major buying signal for Ford, despite first quarter technical improvements. Current metrics predict that this won't be too hard, requiring a small buying spike above the broken 2012 low at $8.82. Although the stock is trading a few cents above that level on Monday morning, technical stars won't be aligned perfectly until the stock also mounts the broken 200-day exponential moving average (EMA) at $9.30.

F Long-Term Chart (1992 – 2019)

The stock hit a six-year low at a split-adjusted $4.46 in 1991 and turned higher, entering a strong uptrend that went vertical in 1998. It topped out at an all-time high in the upper $30s in the first quarter of 1999 and eased into a broad descending triangle top that broke support in 2001. The subsequent decline finally ended at an 11-year low in the single digits in March 2003, marking the lowest low for the next three years.

A weak bounce into 2004 stalled below the .382 Fibonacci sell-off retracement level, giving way a smaller-scale descending triangle that broke support in 2005. That downturn reached 2003 support one year later, generating a weak buying impulse that ended below $10.00. The stock finally broke down in June 2008, entering a near death spiral that hit a 26-year low at $1.01 in November 2008.

Committed buyers generated a V-shaped bounce to $18.97 in 2011, posting a 100% retracement of the 2004 into 2008 downtrend. The stock failed two breakout attempts into 2014 and rolled into a slow-motion but painfully persistent downtick, reaching 2012 range support in October 2018. A breakdown into year end remains in force three months later, but the stock has been testing the underside of new resistance since January.

The monthly stochastics oscillator crossed into a long-term buying cycle in November 2018, presaging more constructive first quarter price action. It is just now crossing above the panel's midpoint, predicting that relative strength will continue into the summer months. Given the technical turnaround below the 2012 low, Ford shares could easily remount that level in the coming sessions and begin a slow climb back to range resistance in the upper teens.

F Short-Term Chart (2018 – 2019)

A buying spike above the January 2019 high at $9.06 would establish a preliminary 2B buying signal, marking the failure of bears to hold new resistance. However, it makes sense to keep your powder dry until the stock also mounts and holds the 200-day EMA, which has repelled recovery attempts since January 2018. Just keep in mind that rapid price gains probably aren't in the cards after a buying signal because it will take months or years to digest massive overhead supply.

Finally, a Fibonacci grid stretched across the downtrend leg that started at $13.50 in 2018 reveals an Elliott five-wave decline that may have ended in December 2018. The .382 retracement level has narrowly aligned near $10, with a rally into that level marking a 100% retracement of the fifth wave and setting off another buying signal, indicating that the multi-year downtrend has probably come to an end.

The Bottom Line

Ford shares may have ended a four-year downtrend in December, but market players should wait for technical buying signals before jumping on board.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.