Ford’s stock chart shows where to buy lower earnings

Friday’s market is mixed, with the Nasdaq a bit higher. But Ford (F) – Get Ford Motor Company report the stock misses, down more than 11% after the earnings release.

Amazon (AMZN) – Get the report from Amazon.com, Inc.Break (BREAK) – Get the Class A report from Snap, Inc. and others in tech are booming on earnings and auto bulls hoped Ford’s push into electric vehicles would pave a similar path for the stock today.

Video: Ford’s Chief Financial Officer Explains How Inflation and Supply Chain Affected Profits

This morning’s jobs report added to the mix.

Despite the Dearborn, Mich., auto giant’s optimistic outlook for its electric vehicle production, an omission from fourth-quarter earnings estimates soured the mood. The tips were solid, but a bit below expectations as well.

The company expects adjusted earnings of $11.5 billion to $12.5 billion before interest and taxes, versus consensus estimates of $12.2 billion. The midpoint of $12 billion is not that far off and would represent a 20% increase from 2021.

As a result, I view Ford as a buying opportunity. The only problem is understanding or to buy this name.

Trading Ford Stocks

Ford stock daily chart.

With Friday’s decline, Ford stock is giving the bulls an “ABC” type correction. The question becomes, how deep will leg “C” go?

Heading into the open, I was hoping Ford would find some stability around the 21-week moving average and reclaim last week’s low at $18.80. This would have given the bulls a nice bullish reversal, but it doesn’t work.

Instead, investors continue to sell Ford shares lower and that’s okay. Why? Because it brings us to look at an important area.

If we continue to decline, keep an eye on the $16.45-$16.85 area. Near the top of this range is the 161.8% downward extension of the current range.

Slightly below is the breakout level of $16.45 and the 200-day moving average. Personally, I prefer a test of this zone against the downward extension level, but traders should be aware of the latter.

At the current low, Ford stock is down about 32% from last month’s highs. It’s a pretty big haircut for what was a relatively strong leader until just a few weeks ago.

Obviously waiting for a drop to the $16.45 area will mean more losses and it may not come to that – especially if the market is stronger – but it’s a great risk/reward setup if we can get it.

On the upside, see how Ford shares are handling the $18.80-$19 zone. If he rises above this area, maybe he can fill the void. But once support fails, we always run the risk of it turning into resistance.

Karen J. Nelson