Ford Stock: The Battery Is Dead And It's Out Of Gas (Technical Analysis)

By Levi at Elliott Wave Trader; Produced with Avi Gilburt.

Have you seen the news? Of course, you have. If you are a follower of Ford Motor Company (NYSE:F) then you will have read about the extensive recalls about to inundate the dealerships. Summing it up, it's about one million vehicles that will be coming into the shop for a fix. Everything from cracked fuel injectors to electrical system issues will be addressed. Yes, recalls happen, but when the company itself is in a weaker position as it is currently, then it can adversely impact the performance of the stock. Let's look at the reasons with Lyn Alden first.

To Rent Or Own?

"I would defer mostly to technical analysis rather than fundamentals on Ford at this point. From a fundamental perspective, Ford no longer has any structural growth to it, faces increasing global competition, is highly cyclical, and its bonds are barely investment grade.

However, it's priced to reflect those low quality aspects. Therefore, I view it as a stock that is best suited for renting rather than owning; it can be held long or short for a period of time but it's not an attractive buy-and-hold investment."

Yes, Lyn - but, the dividend! Well, about that...

"Regarding Ford's dividend, it changes frequently and has been cut before, since it's entirely dependent on earnings which are quite volatile. The dividend is a large part of the stock's value because it's not structurally growing anymore, but the dividend should not be considered reliable dividend income to fund retirement expenses with." - Lyn Alden.

The Anatomy Of A Sell Setup

Let's look at the structure of price that would tell us that we have a solid sell setup in place. We will also discuss how that same structure will quickly inform us when to shift our weight away from the sell and turn more bullish instead.

First, to visualize this, both of our lead analysts share their current charts for Ford:

They are in-synch as to how they are tracking this setup. Note the lower target potential in the $6 - $7 range should the entire structure play out as illustrated. Where would this projection need adjustment or even be wrong? The key now is to stay below the high struck at $14. Above there and price can strike a higher [B] wave as shown by Garrett. However, the primary path for now is down for as long as below $14.

This is generally what we look for in a sell setup: First, the completion of a larger bullish pattern. In Ford, this happened all the way back at the beginning of 2022. From there, note the initial decline as the [A] wave and then the corrective bounce in [B]. [C] waves are in a 5 wave structure for their subwaves. This means that the larger [C] wave down will have an initial move down for wave 1 and then a smaller corrective bounce in wave 2.

If the trader then initiates a short position, then the stop is at the high struck in wave 2, in this case $14. This is a classic sell setup with defined risk vs reward. The third wave of the [C] wave down should be the most severe and possibly with even more momentum than wave 1 or wave 5.

It's A Setup, Not A Certainty

We view the markets through a probabilistic lens. This means that given the structure of price on the chart, we then display and project what is most probable. However, we also keep in mind that the markets are not linear in nature, rather dynamic and fluid. As such, our view must also update as the price fills in each respective chart.

Please also recognize that this in no way is to say that we do not have strong opinions about the direction we see a chart like Ford is headed. It simply is to acknowledge the changing tides of sentiment. What we really need is a methodology that will rapidly speak to us about the best way to adapt to something that is beyond our control.

Do We Control The Tides?

That's easy, of course not. But through science and observation, we have learned how to predict the ebbs and flows of the tides nearly down to the minute. Then, we adapt to what nature is giving us. Our methodology is no different from adapting to what the markets show us. And, it is through science (biology) and observation that we have learned the true nature of how human behavior plays out before our very eyes via price action of stocks and indices.

Do You Have A System In Place?

Those who have experience forged by time in the markets will tell you that it's imperative to have a system of sorts in place. You need to be able to define how much you are willing to risk vs. how much gain is likely. Those who survive across the decades in the greatest game on earth will also inform you that the preservation of capital is paramount.

While there are multiple manners of doing this, we have found Fibonacci Pinball to be a tool of immense utility for traders and investors alike. For much more information on how this system can work for you, please begin with part one of a six part series of articles from Avi Gilburt, "This Analysis Will Change The Way You Invest Forever."

I might also suggest giving this methodology a fair shake. Why? If you have heard of Elliott Wave Theory, what was the source? Surely, you would want to consult someone who has performed an in-depth study of the how's and why's of the method. As well, this comprehensive investigation would be backed up with published studies on the matter and a body of work that shows the utility of said methodology in real-time.

Conclusion

There are many ways to analyze and track stocks and the market they form. Some are more consistent than others. For us, this method has proved the most reliable and keeps us on the right side of the trade much more often than not. Nothing is perfect in this world, but for those looking to open their eyes to a new universe of trading and investing, why not consider studying this further? It may just be one of the most illuminating projects you undertake.

(Housekeeping Matters)

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STOCK WAVES: Where fundamental analysis meets technical analysis for highest-probability investment opportunities! Get leading Elliott Wave analysis from our team, along with fundamental insights and macro analysis from top author Lyn Alden Schwartzer.

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