Ford Motor idling under Bellwether headlight indicator: What to watch when starting the engine

Ford Motor Company F From the bull flag pattern on August 11th, which Benzinga previously indicated. Over the following days, the stock tested the 200-day simple moving average (SMA) as resistance before starting to consolidate below the level.

The 200-day simple moving average is a leading factor that indicates whether a stock is trading in an upward or downward cycle. Ford, like many other big stocks, recently traded near the 200-day simple moving average, which could indicate that the market as a whole is trying to figure out whether the bearish cycle is over or whether the recent bounce was a bullish run within Bigger bear market.

Ford’s rejection of the 200 SMA on Tuesday caused the stock to rebound to the downside and the possibility of a higher bottom within an uptrend pattern.

An uptrend occurs when a stock is constantly making a series of higher highs and higher lows on the chart.

Higher highs indicate bulls are in control while choppy higher lows indicate periods of consolidation.

Traders can use moving averages to help identify the upside, with higher lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating that the stock is in a sharp short-term uptrend.

A rise in longer-term moving averages (such as the 200-day simple moving average) indicates a longer-term uptrend.

The arrow often indicates when the higher top is at the top by printing a reversal candlestick such as a doji candle, bearish engulfing candle, or hanging man candlestick. Similarly, a higher low can be indicated when a Doji, Morning Star or Hammer candlestick is printed. Moreover, higher tops and higher bottoms often occur at resistance and support levels.

In an uptrend, the “trend is your friend” so it isn’t and in an uptrend there are ways for both bullish and bearish traders to participate in the stock:

  • Bullish traders who already hold a position in a stock can feel confident that the uptrend will continue unless the stock hits a lower bottom. Traders looking to take a position in an uptrend can usually find the safest entry at the higher bottom.
  • Bearish traders can enter the trade at the higher top and exit at the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low which indicates that a reversal to the downside might be in the cards.

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Ford diagram: Ford started trading in an uptrend on July 14th and since then has made a consistent series of higher highs and higher lows. The latest confirmed higher low was formed for Ford on Aug 9th at $15.15 and the most recent higher high was formed at $16.68 on Wednesday. The last level is perfectly aligned with the 200-day moving average.

  • It is unlikely that a stock or major market ETF will regain the 200-day SMA or lose the level as support the first time. When the stock approaches the 200 day simple moving average from below, it often takes several attempts before the bulls have enough strength to push the stock higher above the level.
  • Bullish traders will want to see Ford consolidating below 200 days on below average volume, perhaps to form a bullish flag pattern, and then for significant bullish volume to enter and break the stock above the flagship.
  • Bearish traders would like to see Ford continue to reject the 200 day simple moving average and then enter a significant bearish volume and drop the stock below the eight day exponential moving average, which will be bearish at least in the short term.
  • Ford has higher resistance at $16.45 and $17.02 and support below at $15.51 and $14.34.

SEE ALSO: Take That, Elon Musk! Ford F-150 Lightning gives Tesla Model 3 a boost

Photo: Ford Focus Electric at the Los Angeles Auto Show, Wikimedia

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