Technical View - Ford
Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.
Ford Motors (F:NYSE) - Consumer: Autos
Ford traced out a clear "5" wave impulsive move off the $37.30 1999 highs, putting in a 5th wave bottom at $6.58 in March 2003. A subsequent ABC zig-zag correction upward has taken prices back to a previous 4th wave resistance in the $15-18 area by putting in a high at $17.34 in January 2004.
Since the January top, a clear "5" wave impulsive move down took shape that ended at $12.76 on 3/22/04 and an ensuing overlapping corrective (3-wave) bounce has taken prices back to important Fibonacci resistance at the 61.8% and 78.6% retracement levels ($15.57-$16.36 respectively) where they reside now.
Even if the move off the January high is a simple (but large) ABC zig zag correction, and thus eventually bullish for new highs above the January highs, the intermediate term seems to call for another impulse wave down from near this price area to trace out once this corrective bounce is complete.
A strong case can be made however that the January top was the end of a very large degree correction of the impulse wave down from 1999 to 2003: January prices (1) reversed near a previous 4th wave peak (the $18.23 peak from May 2002), (2) registered a weekly "9" Demark trend exhaustion signal; and (3) the ABC zig zag correction from March 2003 to January 2004 had the A leg and the C leg of equal size, a common occurrence in zig zag corrections.
We need not make that big a call right now however, since the move off the January top is a clear impulse, while the bounce from the March lows has been very corrective looking. For now then, an intermediate term bullish simple zig-zag down to $11.90 or so, or a more bearish wave 3 down to $9.25 or so may play out. The risk, with re-evaluation at the recent high of $16.24 is 5%, the potential upside being at least 23% (11.90) and possibly more if a more bearish long term interpretation is operative.
Though this note is strictly a technical one, I think the bearish case for the U.S. automobile industry is manifest: the record incentives in place to move inventory, the substantial exposure to asset financing, the pension/union issues, and the record vehicle-to-driver ratio.
The current automobile environment simply does not bode well for generating meaningful financial returns on selling automobiles and auto services.
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