Ford turns bearish on concerns of decline in sales

Since mid-December, the stock of Ford Motor Company (NYSE: F) has fallen by about 6% to $12.46 as of yesterday’s close. Still, the stock is nearly 13% higher compared with February’s low of $11.02. In fact, considering the investments being made by the company, on November 30th, we had suggested going long in the stock using a call (high or above) option contract from a binary broker. The stock, which was trading at $11.90 at the time of the recommendation, shot to $13.06 a week later, thereby resulting in a profit for those binary traders who had taken a long position. While the stock looks bullish in long-term charts, temporarily, we expect a correction to set in due to the reasons mentioned below.

Considering the slowdown in the sales of F-150 trucks and pickup vans, Ford announced that it would close the Kansas City plant for a week in early January. It can be remembered that the company adopted a similar tactic few months back to match supply and demand. Ford is not the only automaker, which is facing a slowdown in demand. Earlier in March, General Motors announced that it would lay off 1300 workers and terminate the second shift at its Detroit-Hamtramck plant. The report of a slowdown in demand would keep the stock under pressure.

Ford Vehicles

Ford has recalled nearly 8000 Super Duty vehicles built between the period August 10th and September 17, 2016. The recall was made after the strap holding the fuel tank was found to separate from the frame due to a missing reinforcement. This may cause the fuel tank to dislodge and touch the ground. Ultimately, this increases the possibility of vehicle catching fire due to friction.

Analysts at Vetr investment research firm have downgraded the stock of Ford Motors from “buy” rating to “hold” rating. The stock of Ford Motors currently carries 12-month consensus target price of $12.69. It is only about a percent above Friday’s closing price. So, we can anticipate profit booking from investors at the current level.

The price chart indicates the existence of resistance for the stock at 12.60. The MACD indicator is declining with a negative reading. So, the stock of Ford Motors can be expected to undergo a correction.

To gain from the probable fall in the share price, a binary trader can purchase a low or below contract such that the entry should be made when the stock trades above $12.40. Finally, the contract should be valid for a minimum of one week.

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