Chart of the Day: Ford – Driven to Support $F

by Dan March 3, 2014 1:34 pm • Commentary

U.S. auto bulls are hoping that the late Feb strength exhibited by GM’s monthly sales release this morning will carry over into March.  That would stop the streak of consecutive year-over-year monthly declines in auto sales from the big two U.S. automakers.  While GM’s Feb sales data at down 1% vs an estimate of down 7.7% was far better than expected, Ford continues to struggle with Feb sales down 6.1% vs the estimate of down 5.1%.

Despite Ford’s poor relative performance last month in sales, the stock has fared better year to date (down 2%) than its largest peer GM (down 11.6%).

From a technical standpoint, Ford’s one year chart looks to be rolling over with a declining 50 day moving average (purple below), sitting just above key near term support at $15.    Below $15, the next real support is down about 6% at $14.25 (blue), and a break below that would see F trading near 1 year lows:

Ford 1yr chart from Bloomberg
Ford 1yr chart from Bloomberg

On the upside, the stock is likely to see considerable resistance at $16, the level it broke-down through on its December Q4 pre-announcement.  At the moment, the upside / downside risk / reward seems pretty fair with $14 looking like very strong support and $16 serving as decent resistance.

Looking at the 30 day at-the-money implied volatility, the options remain relatively cheap for those interested in making directional plays, despite the recent bounce off of 2 year lows:

Ford 2 year chart of 30 day at the money IV from Bloomberg
Ford 2 year chart of 30 day at the money IV from Bloomberg

While we think that the stock could remain range-bound btwn $14 and $16 in the near future, the options market does not currently offer a decent opportunity to add overlays for longs to add yield, since options are quite cheap on a historical basis on in terms of outright yield.