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Stocks  | April 30, 2020

Ford Motor Company's (F) first quarter 2020 earnings release on Tuesday evening offered few surprises, with America's second largest auto manufacturer posting a loss of $0.23 per share on $34.3 billion in revenue. That marked a 14.9% year-over-year decline, beating revenue estimates that anticipated even fewer first quarter sales. The stock is up just three cents on Wednesday morning, highlighting extreme apathy rather than active buying pressure.

Chart showing the share price performance Ford Motor Company (F)

The first quarter sell-off in Ford stock broke support at the 2012 low near $9.00, spilling lower in a vertical pattern that stretched nearly 60% into March's 11-year low at $3.96. It bounced above $5.00 at month end and has been grinding sideways around that level for the past month. Ominously, Ford stock is now trading just four points or so above the 2008 low at $1.01, when many analysts expected the old-school industrial giant to go bankrupt.

A vertical bounce off that low stalled at the 50% retracement of the 1999 into 2008 downtrend in the first quarter of 2011, marking a high that hasn't been challenged in the past nine years. The stock fell into the single digits in 2012, posting a higher long-term low, ahead of a slow-motion uptick that failed 85 cents below the 2011 high in 2014. Price action then eased a shallow decline that carved a long series of lower highs into 2018, when it completed a 100% retracement into 2012 support. 

A fourth quarter breakdown attracted committed buyers, yielding a 2019 uptick that ended with another lower high in July. Lower prices into 2020 marked the calm before the storm, with the pandemic-driven somersault violating 2012 support and establishing new resistance between $7.50 and $9.00. The uptick through April has now reached within two points of this barrier, limiting upside potential through the second quarter and possibly the third quarter.

General Motors Company (GM) is set to report earnings on May 6 after announcing the suspension of its dividend and share buyback program. The company wants to bring workers back online, but the United Auto Workers (UAW) is resisting the effort, stating that an early May restart may be too early to protect worker safety. The pandemic is also delaying restart plans in other parts of the world, highlighted by a Brazil shutdown that is expected to last into mid-June.

Chart showing the share price performance of General Motors Company (GM)

General Motors stock has outperformed Ford by a wide margin in recent years, but that hasn't helped long-suffering shareholders who have watched the stock spend nearly a decade failing to pierce resistance in the $40s, not far above the 2010 initial public offering at $35.30. Unfortunately, the stock has now broken multi-year support in the mid-$20s and has spent the past month testing March's deep violation of the 2012 low at $18.72.

The first ascent above $40 took place at the end of 2013, reaching $41.85 before aggressive sellers failed the breakout. It returned to that level in October 2017 and broke out once again, posting an all-time high at $46.76 before turning tail and dropping back into the $30s in March 2018. A final attempt in June 2018 failed as well, yielding dead sideways price action into a March 2020 sell-off that broke the 2018, 2015, 2012, and 2011 lows before bouncing into April.

The decline posted an all-time low at $14.32 on March 18, yielding a two-legged bounce that peaked just below 50-day exponential moving average (EMA) resistance near $25 on April 9. The stock has been grinding sideways since that time, working off an extremely oversold technical reading while investors await reopening plans and first quarter earnings. Bottom fishers have been active during this period, but the on-balance volume (OBV) accumulation-distribution indicator has recouped just half of the accumulation lost during the first quarter rout.

The Bottom Line

Ford and General Motors stocks have broken major support levels and entered secular downtrends that could last several more years, at a minimum.

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