Toyota stock shows strength despite drop in sales rank

After decades of steady and impressive growth, Toyota’s recall issues have taken its toll on its position in the U.S. auto market, falling from second to third place, behind General Motors and Ford Motor Co. However, the stock price has yet to reflect any such downgrade by investors.

Toyota (NYSE: TM) has been trading above its 50-day moving average since early November, but in a sideways channel. The weekly chart shows a breakout movement from late October that’s still in place. However, it’s the monthly chart that goes back to 2009, when the industry unraveled, that tells the overall story.

According to a Nasdaq Report, auto sales may be the force that causes the tide to raise all global stocks.

Like other stocks in the auto industry, Toyota suffered a sell-off from its 2007 high of $138. And like most other stocks, it bottomed in the last month of 2008 at $55.41. Since that time, it has risen to $91.97 in the first month of 2010.

The rest of 2010 was not kind to Toyota or to its stock. The price fell 26% or $24 down to $67.56 in September. Then again, many stocks fell during that time. November, though, brought out the bulls, which have taken Toyota stock upward to its present price of just over $80.

Most know the fundamental story. And they know Toyota has plenty of cash to deal with all the litigation issues. Along with the press it may receive at 2011 NAIAS in Detroit next week and the positive industry news, perhaps that’s why TM is showing bullish bar the first week of 2011.

Weekly Chart Assesment

If anyone is looking for a pullback to price support, they might find it at the broken weekly resistance level at 79.81 (red) and then at the turning-point low at 76.56 (blue).

It’s easy to forget that some stocks, despite bad press, can still climb a wall of worry just like the general indexes, and often on average volume. In cases like that scenario, you will see higher highs and higher lows, the real telltale indicator of a bullish trend bias.

Full Disclosure: As of this writing, Frank does not hold any stock or option positions on Toyota. As a day trader and author of “Awaken Your Speculator Mind,” he contributed the price chart.

Additional Reading:
Toyota slips to third place place behind Ford
GM stock posting higher highs since IPO
The Top 10 best-selling vehicles in the 2010 US market
Ford stock price dynamics still show bullish

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