Yesterday we provided a fundamental analysis to instill confidence in owning Ford Motors Company (F) shares again. Consistent with our portfolio management philosophy of both fundamental and technical analysis, today let's evaluate the technical picture of Ford shares.

Below you see the daily chart of F shares, smoothed out with the black line. Looking back starting from November of 2020, trying to draw a trendline through the lows from then to the most recent low in September 2021, we can generate the green line. Trying to measure the magnitude of drawdowns from highs to trendline, we have a series of ~10%, ~10%, ~20% declines. 

Ford made 52-week high back in mid-January, and since then has been declining precipitously. How do we make a strong educated guess of where shares will likely end up? We revert to the green trendline. Effectively, a decline towards the green trendline would mean a ~30% decline, towards $16/share. We strongly believe this is where Ford shares will end up at before making any move higher.

What's significant about this level? There are two factors:

First is the 200-day moving average (red curve). Generally, as we have said multiple times before, stocks that are on the uptrend generally respect the 200-day moving average, and typically this serves as a last-line of support for a stock. Ford shares have not broken the 200-day moving average since the Covid sell-off in March of 2020. Expect support here. 

Second, previous resistance should become support. Shares topped $16 in the middle of last year, followed by a decline, but finally broke out of the $16 price level in November. Think of investors who missed the ride up to $25 now seeing this $16 price level comes into play, expect them to come in and create some bid here.