Ford Motor Company (F) reported a 4.9% drop in third quarter comparative sales earlier this month, adding to a string of bearish metrics that have dropped shares of America's oldest auto manufacturer into a test of December 2018's nine-year low at $7.41. Continued strength in pick-up truck sales failed to offset weakness in other categories, while overseas growth has taken a major hit as a result of rising tariffs and deteriorating sentiment for American products.
The company receives less media attention than General Motors Company (GM), which has been criticized repeatedly by President Trump for shutting down American factories. Ford faces the same challenges as its larger rival, with high labor and materials costs weighing on results at the tail end of a decade-long economic expansion. Many Wall Street analysts now expect Ford to miss third quarter earnings per share (EPS) and revenue estimates, with results due to be reported on Oct. 23.
A September debt downgrade by Moody's has also ignited speculation that Ford will face liquidity issues in coming years, renewing concerns laid to rest after the stock fell to a multi-decade low during last decade's bear market. A long overdue restructuring plan could be costly and take many years to produce results, raising fears that long-suffering investors will get bombarded by headlines questioning Ford's long-term viability.
F Long-Term Chart (1987 – 2019)
A multi-year uptrend topped out at a split-adjusted $10.74 in 1987, setting a resistance level that persisted into a 1993 breakout. Ford stock ground sideways at new support for another four years before taking off in a healthy trend advance that posted an all-time high at $38.83 in the second quarter of 1999. Committed sellers then took control, generating steady downside that ended at an 11-year low in the single digits in March 2003.
A proportional bounce failed at the 50-month exponential moving average (EMA) in 2004, marking the highest high for the next seven years, ahead of renewed selling pressure that broke the prior low in the second quarter of 2008. The stock posted catastrophic losses during the economic collapse, finally settling near a buck in November. Unlike GM, Ford barely escaped a bankruptcy filing, bouncing strongly in a recovery wave that completed a round trip into the 2004 high in 2010.
The post-apocalyptic euphoria turned out to be misplaced because the 2011 high at $18.97 marked the highest high of the decade, with 2013 and 2014 breakout attempts stalling before reaching that pivotal level. Price action entered a shallow but persistent downtrend after the second failure, grinding out an endless string of lower highs and lower lows that reached a nine-year low in the fourth quarter of 2018.
The monthly stochastics oscillator crossed into a sell cycle at the overbought level in June 2019, predicting at least six to nine months of relative weakness. It still hasn't reached the oversold zone, warning market players that downside pressure could escalate after this month's earnings report. Ominously, accumulation-distribution readings have now dropped to levels posted in December 2018, predicting that it will take little downside to generate another round of sell signals.
The stakes are exceptionally high because the multi-year decline reached the .618 Fibonacci sell-off retracement of the post-crash bounce in June 2019, and a break of that harmonic support level would expose continued downside into the .786 retracement level at $4.77. That would translate into an additional 50% decline off Friday's closing print, adding to investor pain that shows no signs of letting up as Ford nears the end of a terrible decade.
The Bottom Line
Ford stock has reached a critical price level that could signal a replay of last decade's near-death experience.