Is Ford's Stock Breaking Out Again?

Since its fall upswing, the stock's traded largely sideways - is that about to change?

On Wednesday, Ford Motor Co. (NYSE: F) rose more than 3% after being blasted back into a weekly bull flag on Dec. 13.

Ford's E-Transit and F-150 Lightning Pro commercial electric vehicle models are in high demand, which the firm expects to result in rapid sellouts when they go on sale next year. The vehicles will be distributed through Ford Professional, a separate part of the business focused entirely on business clients.

After breaking away from a downward trendline, Ford's stock has been on an upswing since late September. Between Sept. 22 and Nov. 9, the legacy automaker transitioning to an electric carmaker's stock increased almost 60% to a high of $20.51.

Since then, Ford has been stuck in a weeks-long consolidation period, trading largely sideways between the November 9 peak and a lower support level at $18.99.

Although the stock has broken out, it may take some time for it to establish a base. However, if the weekly bull flag pattern is still in effect, Ford may be on track for another huge advance north, especially if this year gives investors a Santa Claus market rally.

The Ford Chart: Once the stock hit its November 9 high, it entered a consolidation phase to bring down its relative strength index (RSI), which had been flirting with the 70% to 82% ranges for weeks. When a company's RSI reaches or surpasses 70%, it is considered overbought, which can be a technical trading sell signal.

On Dec. 10 and Dec 16th weekly chart, Ford broke out from its bull flag formation but each attempt was a bear trap. The pattern is still in force because the stock has not given up support from the eight-day EMA on the same timeframe.

On Wednesday, Ford was attempting to break through the flag's upper descending trendline as resistance. If Ford is able to break through the flag and establish bullish momentum, the measured move may be around 58%, suggesting that Ford could trade up toward $29 in the future.

There is a hole in Ford's chart, which may worry bulls since gaps on charts are typically filled 90 percent of the time. Because the top of the gap is 20% lower than Ford's current share price, it may be some time before that happens.

On Wednesday, Ford reclaimed the backing of the eight-day and 21-day exponential moving averages (EMAs), both of which are positive signals. The 50-day simple moving average shows that long-term sentiment is bullish, and Ford is also trading above the 50-day SMA, which indicates longer-term optimism.

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