Ford Motor Company (NYSE:F) was trading mostly flat on Thursday, despite the S&P 500, which was sliding about .7%.
The legacy-turning-electric vehicle manufacturer has been in a consolidation phase for almost two weeks after forming a triple bottom pattern just above the $12 level on the weekly chart.
A double, or weekly, the bottom pattern is a reversal indicator that shows a stock has dropped to a key support level, rebounded, back tested the level as support and is likely to rebound again. It is possible the stock may retest the level as support again creating a triple bottom or even quadruple bottom pattern.
The formation is always identified after a security has dropped in price and is at the bottom of a downtrend, whereas a bearish double top pattern is always found in an uptrend. A spike in volume confirms the double bottom pattern was recognized and subsequent increasing volume may indicate the stock will reverse into an uptrend.
- Aggressive bullish traders may choose to take a position when the stock’s volume spikes after the second retest of the support level. Conservative bullish traders may wait to take a position when the stock’s share price has surpassed the level of the initial rebound (the high before the second bounce from the support level).
- Bearish traders may choose to open a short position if the stock rejects at the level of the first rebound or if the stock falls beneath the key support level it created the double bottom pattern at.
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The Weekly Ford Chart: Ford’s triple bottom pattern was formed over the weeks beginning May 9, May 16 and May 23. On May 25, the stock reacted bullishly to the pattern and began to soar up, rising 13% to top out at the $13.97 level on June 1.
- Chart patterns on larger timeframes can take longer to play out. Whereas the reaction to a double bottom pattern on a daily chart can take a few days to occur, the reaction to a pattern on a weekly chart can take weeks to play out, indicating there may be more upside potential ahead for Ford.
- Over the past two weeks, Ford has been consolidating mostly sideways, which may have formed a bull flag pattern on the weekly chart. If that pattern becomes dominate, the measured move suggests Ford could rise up toward $15.
- Bullish traders hoping that either the triple bottom pattern or bull flag pattern dominates over the coming weeks should note Ford is trading in a downtrend on the daily chart, with the most recent lower high printed on Wednesday at $13.85 and the most recent confirmed lower low formed at the $13.19 level on Tuesday. If the trend continues and Ford falls below $13, the bull flag pattern will be negated.
- Ford has resistance above at $14.34 and $15.51 and support below at $12.79 and near $12.
Photo: Courtesy Ford