Ford Motors Shares Look Poised for a Rebound
Shares of Ford Motors (F) have slid in recent sessions. The company reported a massive loss in the 4th quarter of 2019 last week. This resulted in a one-day, 10 percent drop. Since then, shares have dropped even further.
Yet the company’s relative strength index, or RSI, is now reading at oversold levels.
Remember, RSI is a reading from 1 to 100, with anything over 70 as overbought and anything under 30 as oversold. Currently, Ford’s RSI has dropped under 30, and is reading as oversold.
Traders should prepare for a bounce that retraces most of its post-earnings loss in the next few trading sessions.
How high could shares go? A 10-15 percent rally from here would send the company off of oversold technical readings.
Shares would still need to go a bit higher to get back to their pre-earnings highs. But at that point, a different set of technical indicators would come into play as the company looked to re-test old highs.
In the meantime, another technical indicator, the moving average convergence divergence, or MACD indicator, also points to oversold levels, with a -0.2 reading. The MACD indicator looks at a combination of factors. Those factors include the strength, direction, momentum and duration of a stock’s price. It tends to be a better indicator than RSI over longer time frames.
Having multiple technical signals point to oversold levels is ideal for a swing trade.
We like shares of Ford up to $8.15, with a potential move back to $9 in the coming weeks. The total expected swing is likely to be in the 10.4 percent range based on these prices.
Options traders willing to swing for bigger gains should consider the June $9 calls. Trading in-the-money right before earnings, these options have been crushed and can now be bought for just $0.20, or $20 per contract.
Depending on the speed and strength of a rebound, they offer the potential for investors to double or triple their money in the coming weeks.