This week’s Chart of the Week features Ford (Ticker: F) after the stock marked its highest close since January 2017. However, we are now expecting a pullback in Ford stock due to several technical indicators of downward price action in the near future. Last week, we saw the stock rise to a resistance level that we have seen hold since June and make an intraday reversal at $13.29. This happened at the same exact time as the RSI (Relative Strength Indicator) topped 70 which was an alarm for overbought conditions. That said, we are not looking for a large correction, but simply a pullback to $12.75 which is still a substantial move lower of roughly 4%. Over the next couple weeks we look to break below the 50 day moving average at $13.12. This will lead to a drop to $12.88 which is an uptrend line that has held multiple times since August 2017. Finally, we are looking for a break below $12.88 to $12.75 which is the top end of a channel from February through March 2017 and is indicated above. Once reaching $12.75, we expect the RSI to have corrected to ~40 and that will be a good indication that our short trade should come to a close. A great way to approach this opportunity could be to go through the options market to leverage the call and take advantage of low implied volatility in the current bullish environment.
Farewell and Trade Well,
Founder and Editor-in-Chief