Long F (unless you think a recession is coming)
Updated
Just a couple of weeks ago I called for a 20% fall in Ford that happened a LOT faster than I expected. Now, I think there is a compelling case to be made to go long.
Technically, it is right at support (circled in white) as I write this. That is a low that hasn't been eclipsed since the COVID crash. It's also VERY oversold. In fact, the last 4 times it's been this oversold (going back to 2011), 3 of the 4 times it has closed at least 18% higher within 3 months. The other time was the COVID crash and it was higher 6 months later that time.
From a more fundamental perspective, the impending rate cut(s) will make cars more affordable along with lowering mortgage rates and opening the possibility of refinancing and cost savings there (though I think it will take more than one cut to get that effect). The bad news from their last earnings report was already baked in before this recent market collapse as well. Finally, the dividend is over 6% right now. So I'm being paid a higher rate than bonds to sit and wait for the stock to come back.
Could we go into recession? Sure, but I don't think that's where we are headed and overall market action today leads me to believe the big players don't think that either. The Fed has lots of powder to fight that right now. Could F lower its dividend? Yep. But until I see that happen I'm not betting on that either.
Trump tariffs? Those actually do scare me, but I suspect that's mostly talk that appeals to his base. If Harris gets elected, I think protecting the auto industry and its workers will be a very high priortiy, so I don't see immense political risk either.
So that's my case for long F right now. I'm making this trade and will keep it updated as things happen.
Technically, it is right at support (circled in white) as I write this. That is a low that hasn't been eclipsed since the COVID crash. It's also VERY oversold. In fact, the last 4 times it's been this oversold (going back to 2011), 3 of the 4 times it has closed at least 18% higher within 3 months. The other time was the COVID crash and it was higher 6 months later that time.
From a more fundamental perspective, the impending rate cut(s) will make cars more affordable along with lowering mortgage rates and opening the possibility of refinancing and cost savings there (though I think it will take more than one cut to get that effect). The bad news from their last earnings report was already baked in before this recent market collapse as well. Finally, the dividend is over 6% right now. So I'm being paid a higher rate than bonds to sit and wait for the stock to come back.
Could we go into recession? Sure, but I don't think that's where we are headed and overall market action today leads me to believe the big players don't think that either. The Fed has lots of powder to fight that right now. Could F lower its dividend? Yep. But until I see that happen I'm not betting on that either.
Trump tariffs? Those actually do scare me, but I suspect that's mostly talk that appeals to his base. If Harris gets elected, I think protecting the auto industry and its workers will be a very high priortiy, so I don't see immense political risk either.
So that's my case for long F right now. I'm making this trade and will keep it updated as things happen.
Note
Initial entry at 9.71 at the close today. Will add more if it stays oversold.Trade closed: target reached
Sold Ford just after the open today because I forgot to at the close yesterday when it first became overbought. Sold it at 10.46, making the trade a +7.7% in 8 days. I think it could continue its run a little longer, but rules are rules and frankly, I'm a little nervous as to what Iran and Russia could do to spoil this little market party so I'm gonna stick to the rules and not be greedy right now.Note
Oops. I forgot to include the .15/share dividend payment in my calculation. With that included, it's a 9.3% return in 8 days.Note
Trade summary (for accounting purposes)
Wins 1 Losses 0
+7.7% in 8 days
Per lot per day held annualized return = +242.6%
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