|Taking at look at the daily chart of Ford Motor (F) (Figure 1), we can see that the stock formed a head-and-shoulders pattern over the last several weeks. Because this pattern formed after a decline (June-August), it should be considered a bearish continuation pattern. A move below neckline support would signal a continuation lower and project further weakness.|
|This head-and-shoulders pattern is quite small, with just over a point from the top of the head (14.68) to the neckline (13.61). Based on traditional technical analysis, this would imply a move to around 12.60 after a neckline break (14.68 - 13.61 = 1.07, 13.68 -1.07 = 12.61). While that may not seem significant, a look at the weekly chart reveals more dire implication.|
|Figure 1: Daily chart, Ford Motor. The stock formed a head-and-shoulders pattern over the last several weeks.|
|Graphic provided by: MetaStock.|
|Ford formed a large triangle in 2004 and is currently consolidating near the lower support line. In fact, the pattern from the June high (red arrow) to early October looks like a decline and consolidation (gray oval). This consolidation also doubles as the head-and-shoulders pattern on the daily chart. A move below the consolidation low (13.61) would signal a continuation lower. See Figure 2.|
Figure 2: Ford. The pattern from the June high (red arrow) to early October looks like a decline and consolidation (gray oval).
|A support break at 13.61 on the weekly chart would project further weakness to the 10-11 region. This support zone is confirmed by support from broken resistance that extends back to May 2003. While the head-and-shoulders support break on the daily chart does not suggest much weakness, it is clear on the weekly chart that a neckline break would be quite bearish.|
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