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SUPPORT & RESISTANCE


Ford Motor At Support

03/15/11 11:35:18 AM
by Chaitali Mohile

The current technical supports are highly important for Ford Motor.

Security:   F
Position:   Hold

After a robust bullish breakout in mid-2009, Ford Motor (F) surged to a new high at $19. The 50-day moving average (MA) offered strong support through out the rally. During the journey, F retraced to test the support of the 50-day MA, and immediately rushed upward. Although the price made new highs, the relative strength index (RSI) (14) formed a triple top -- a bearish reversal formation in Figure 1. Thus, F initiated an intermediate bearish rally from $19 toward the support of the 50-day MA. However, a developing downtrend of the average directional index (ADX) (14), the negative moving average convergence/divergence (MACD) (12,26,9), a doji candlestick in the price chart suggests that F is likely to turn weaker near the support level.

FIGURE 1: F, WEEKLY
Graphic provided by: StockCharts.com.
 
Under these circumstances it would be difficult for F to sustain the moving average support. The stock would shed a few more points once the stock breached the support line.

FIGURE 2: F, MONTHLY
Graphic provided by: StockCharts.com.
 
On the monthly time frame (Figure 2), F moved closer to the 200-day MA support. The RSI (14) has formed a double top -- again a bearish reversal formation, and the ADX (14) is approaching an overheated uptrend level (40). The 200-day MA is long term and tends to be a reliable technical support. However, the RSI (14) would remain bullish till it sustained above 50 levels. The overheated uptrend could result in consolidation at the 200-day MA. Therefore, the stock has plunged in the crucial levels.

Although the stock is showing bearish pressures, we cannot overlook the MA support levels on the weekly as well as monthly time frames. Short traders can marginally cut their positions till the stock consolidates, and later, reenter the trade. F has already lost $5 during the descending rally, and so, establishing support at the MAs is very important.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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