Those of you who’ve followed me for a while know how much I love volatile names – in my view, they tend to offer the best momentum setups.
That’s why I’m always on the hunt for small caps, short squeezers, hot IPOs, meme stocks, you name it. I’d take all of them, the wilder – the better.
With that in mind, today’s subject will only seem more counter-intuitive – it’s the Ford Motor Company (F).
If I asked every single trader or student of mine to name a fun stock, I can bet you that F would never make the list.
It’s large-cap, it’s boring, the float is big, and most importantly… Who cares about it, really?
Well, notwithstanding any of the above, let me show you why I think the good ole Ford might have a few tricks up its sleeve:
In an entry as surprising as this letter, I mentioned Ford Motor Company on one of my momentum watchlists a few months back.
Here are my exact words:
And here’s the chart (highlighted in yellow is the day I put together the game plan):
There’re a few things to take away;
- A stock that moves from ~$11.50 to nearly $16.50 in a matter of 3 weeks is by no means boring.
- I was exactly 55c off in my target
- A breakout above the 6-year high in the $13.20 area has so far held well and gotten defended
This only adds to my next point…
Ford Is Strong
Ford is in a good spot on the chart, and the picture gets only better when you look at actual numbers.
Even having retracted from the highs, Ford Motor Company is still up ~68% YTD – not a shabby performance by any means.
But looking at its peers is where you really notice the stock is in the league of its own. Here’re YTD gains of F’s main competitors:
- General Motors (GM) – ~40%.
- Toyota Motors (TM) – ~18%.
- Honda (HMC) – ~16%.
- Nasdaq Global Auto Index (CARZ) – ~18%.
Likely driven by its EV ambitions, Ford has definitely developed some notable momentum in the space – at least when compared to the traditional car manufacturers.
The Setup Is Great
Now back to what’s happening right now: just yesterday, on July 28th, 2021, Ford Motor Company announced its quarterly results – and impressed on most metrics.
The company’s CEO also reaffirmed the company’s commitment to advancing EVs and noted that the current chip shortage situation is slowly improving.
The news sure came in handy, as the shares are gaining nearly 4%, as I speak:
What’s even more important, though, is F’s position on the chart:
- As noted, the stock has re-tested and defended the prior breakout area
- It has not broken cleanly above the downtrend of the past 2 months.
- The volume might be picking up
Look, I know Ford is not a household name when it comes to momentum trading.
But I can’t ignore the rather telling technical signals.
I personally wouldn’t be surprised one bit if the stock goes for a re-test of the early June’s highs and possibly breaks above that, as chip shortage fears subside.
Longer-term, the next big resistance is at $18.
In any case, I’d only consider a long trade against $14, and if $14 holds up well – giving me a 1/5-1/10 risk/reward.