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Ford expects June sales to dip, stock price facing 2 year resistance
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Chart of Ford's stock showing the 2 year downtrend
Ford Motor Company is expecting its U.S. sales for June 2009 to be down 10 to 20% from the year ago period. An executive at Ford said, this will give Ford a higher share of the auto market, and is signaling that demand is beginning to stabilize.
George Pipas, Ford’s U.S. sales analyst, said the worst may have passed, and said the U.S. could see economic growth in the second half of 2009. He thinks it is likely that higher auto sales will also result due to the recovery. Jim Cramer, is also a believer that the economy will recover in the second half of 2009, and he has made some predictions of his own.
Ford is the only U.S. automaker that has avoided bankruptcy, but they have had their fair share of troubles. Ford posted a company record $14.7 billion net loss in 2008, but has high hopes of returning to profitability by 2011.
The U.S. auto industry as a whole could post sales declines of 25 to 30% in June compared to the year ago period. Ford is expecting a 10 to 20% decline, which could mean an overall larger market share when compared to June of 2008. This news may help drive Ford’s stock price through the strong resistance it is facing.
Looking at a weekly chart of Ford, it is easy to see that it has been in a downtrend for 2 years. There is a downward trend line from the peak at $9.69 on 06/29/07 that Ford has been unable to break through. Exactly 2 years to the date, the stock price is bumping right up against this trend line, and it needs to break through in order to continue its current uptrend. The stock is currently trading for $5.78, and needs to close decisively above $6.50 on a weekly chart in order to break this 2 year downtrend.
If a recovery is on the way, Ford will most likely consolidate in the $5 range and then break out above the down trend line in a couple of months. This would also complete an inverse head and shoulders pattern on the daily chart, which could propel the stock back up to the $9 to $10 range. For now traders should respect the 2 year down trend, and only enter a long position on a decisive move above $6.50 per share.
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