A Developing Bottom For Ford Motor Co.?

03/05/04 01:28:40 PM

by Kevin Hopson

Analysts and investors have been betting against Ford Motor Co. in recent months but don't let the negative sentiment fool you.

Security: F
Position: Accumulate

Ford Motor Co. (F) has been in a short-term downtrend since early January, when the stock proceeded to put in a double top just above the $17.00 level. However, there are signs of a forthcoming bottom in the stock, as bullish divergences on the chart and continued pessimism towards the company are currently supporting this theory.

Looking at the six-month chart of Ford, you will notice that the relative strength index (RSI) and moving average convergence/divergence (MACD) have been moving higher even though the stock recently put in a lower low. Additionally, money flow has turned positive and the 61.8 percent retracement ($13.06) from the Oct. '02 to Dec. '02 rally is coming into play at slightly lower levels. As a result, this retracement level could act as the ultimate bouncing point in the near-term.

Graphic provided by: Stockcharts.com.

If you turn your attention to market sentiment, you will see that investors are extremely pessimistic towards the company. Only three of the 16 covering analysts currently have a buy rating on the stock, while short interest (as of Feb. 9) sits at 78.1M shares - or nearly 6.0x normal daily volume. Additionally, the stock's put/call open interest ratio has risen to 1.29 from 0.81 over the last month and a half. This means that investors have been buying more puts than calls during the stock's recent downturn -- usually a sign of a forthcoming bottom. As a result, I would look to accumulate shares of Ford Motor Co. in the near-term. Given the company's solid dividend yield of nearly 3 percent, traders can afford to be more patient with this one.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.