Snapshot of the Ford stock daily chart just before noon on 10-26-2011

Ford stock breaks below 4-day high-low channel after poor guidance report

No need to read the fundamental report; all you have to do is take one look at Ford Motor Company (NYSE: F) stock intra-day and daily charts where price dynamics reveal the short-term trend bias has officially changed.
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Stocks may miss earnings, but they cannot miss on future guidance; and that is what drove Ford stock lower in early trading. Even MarketWatch reported quickly that Ford Motor Company (NYSE: F) shares were among the hardest hit on the S&P 500 Index early Wednesday.

Yet, while Ford’s intra-day chart showing the first hour of trading reveals the demise, the daily chart so far (shown) shows Ford stock breaking below its 4-day high-low channel. Techncially speaking, the price dynamics do not lie; they reveal a breakout to lower levels.

Fact is, the automaker opened at 12.09, down from Monday’s close of 12.49; that’s about 3.2% right out of the opening bell. Then Ford stock fell further during the first hour; which, by 11:18 a.m. the stock was trading at 11.68, making the drop from Monday to 6.5% with a daily lower low of 11.54.

The reason for the market reaction was obviously fundamental. Ford said its third-quarter earnings fell to $1.65 billion, or 41 cents a share, from $1.69 billion, or 43 cents a share, a year ago. Then Ford gave guidance for 2011 that did not sit well with traders: The company said unit sales in the U.S., its largest market, would likely be at the low end of its 13 million to 13.5 million estimate.

Crude Oil Inventory Drop was No Help

One might think that Ford stock would have perked up on the news that crude-oil futures added to losses Wednesday after a government weekly inventories report showed a higher-than-expected increase in crude supplies for the week ended Oct. 21.

For the record, the Energy Information Administration (EIA) said supplies rose 4.7 million barrels in the week. That compares with analyst expectations around an increase of 200,000 barrels, according to a Platts survey per MarketWatch.

The analysts polled by Platts had expected gasoline stockpiles to dropdown 1.25 million barrels, but the EIA reported gasoline inventories decreased by 1.4 million barrels.

Ford Stock Must Stand on its Own Merits

Aside from the external news, Ford stock has had its own price dynamic problems lately. It was just a week ago that I reported Ford stock was still in limbo, even after getting approval from the UAW for a new 4-year contract.

Perhaps the debt is having an effect, and missing an earnings reach is not helping; but the industry has been leaking out news that it was expecting total industry sales to drop slightly due to the economy.

On the product front, Ford automobiles look great; and the EcoBoost engine technology is giving V8 performance in V6 packages these days. For the record, this TN reporter will be attending Ford’s media event next week about upcoming products.

Stock Chart Analysis

Ford stock has been down from its high in January of 18.97. Its low for the year is 9.05 achieved just this month of October. The 52-week mid-point is at 14.01.

The stock’s price is still below its 150-day moving average of 12.82, but above its 50-day moving average of 10.68.

Assessment? What else can I say when the charts speaks so clearly? Ford stock is every bit on the start of a swing to the downside, as noted by the fallout below the 4-day high-low channel; and now it’s supported by a gloomy fundamental scenario. This could change, obviously even later today, but the news shock has had its effect on investors' psyches for the moment.

For the record, I hold no positions in Ford stock right now. If I believe Ford will rebound, then I might consider selling a downside put option in order to get paid while I wait to pick it up at a cheaper price. And right now that 50-day moving average and the latest monthly low of 9.05 are my support levels until proven otherwise.

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Full Disclosure: At time of publication, Sherosky, creator of the auto sector charts for TN, is neither long or short with the mentioned stocks or futures, though positions can change at any time. None of the information in this article constitutes a recommendation, but an assessment or opinion.

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About the Reporter: After 39 years in the auto industry as a design engineer, Frank Sherosky now trades stocks, futures and writes articles, books and ebooks like, "Perfecting Corporate Character," "Awaken Your Speculator Mind", and "Millennial World Order" via authorfrank.com. He may be contacted here by email: [email protected] and followed in Twitter under @Authorfranks

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