Ford Motor Stock 'Too Cheap to Ignore' Heading Into Earnings

Ford Motor Company (F) reports earnings after the closing bell on Wednesday, Jan. 23, and according to Macrotrends, the stock has a P/E ratio of just 6.22 with a dividend yield of 6.99%. This makes the stock "too cheap to ignore."

At the end of 2018, Ford stock closed at $7.65. This level was input into my proprietary analytics, and new monthly, quarterly, semiannual and annual levels were started for the beginning of 2019. On the first day of the year, the stock traded as low as $7.48, which was a buying opportunity between my annual value level at $7.31 and my semiannual pivot at $7.56. The initial upside was my quarterly risky level at $8.77, which is now a pivot (or magnet) until the end of March.

The stock closed Friday, Jan. 18, at $8.58, up 12.2% so far in 2019 and up 15.8% since its Dec. 26 low of $7.41. The stock is also in bear market territory at 29.4% below its 2018 high of $12.15 on June 12.

Ford reports earnings after the close on Wednesday, and analysts expect the auto maker to post earnings per share of 30 cents. In recent quarters, there has been a decided trend toward pickup truck, crossover and SUV sales. This led Ford to decide to discontinue making sedans except for the iconic Mustang brand. The F-Series trucks, Ford Expedition and Lincoln Navigator are the preferred brands moving forward. The Lincoln Luxury brands should continue as a plus, as the $90,000 Navigator is outselling the $70,000 version. The company offers finance plans at favorable rates. A negative is higher commodities prices.

Ford made an 80-year anniversary of the Lincoln Continental with the old-time rear door feature — called suicide doors by car aficionados — that open the opposite way as standard doors. They are making only 80 of these at $110,000, and they were sold out in 48 hours. Except for the doors, this Continental is exactly like my 2018 Lincoln Continental pictured below at half the price. The color of my continental has been discontinued but seems to match that of the collector's anniversary edition.

The daily chart for Ford

The daily chart for Ford shows the formation of a "death cross" on March 6, 2018. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average and indicates that lower prices lie ahead. Under this formation, the trading strategy is to sell strength to the 200-day simple moving average, which was a magnet between April 10 and June 25, when the average was $11.50 to $11.63.

As a result of the 2018 close, there are four new monthly, quarterly, semiannual and annual levels. There are three horizontal lines on the chart, with my semiannual and monthly value levels at $7.56 and $7.70, respectively, and my quarterly pivot at $8.77.

The weekly chart for Ford Motor

The weekly chart for Ford Motor will be positive if the stock ends this week above its five-week modified moving average of $8.57. The 200-week simple moving average, or "reversion to the mean," is at $12.04. The stock has been below this key moving average since the week of Dec. 4, 2015, when the average was $14.20. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 39.00, up from 33.37 on Jan. 18. The horizontal line at $7.31 is my annual value level.

Trading Strategy: Buy weakness to my monthly, semiannual and annual value levels at $7.70, $7.56 and $7.31, respectively, and reduce holdings on strength to my quarterly pivot at $8.77, then to the 200-day and 200-week simple moving averages at $9.99 and $12.04, respectively.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.