Ford Motor Company (Ticker Symbol: F) and Volkswagen Group have announced they are teaming together in a joint venture to add autonomous and electric vehicles to their list of projects. The companies will continue to be independent of each other and remain competitive within the auto space. This is a collaboration to share in technology and share the expensive costs of doing the research and development of creating electric and autonomous vehicles. Automakers are finding that the technology is proving to be more difficult to introduce to the market than experts in the industry anticipated, so collaborating with other automakers can save on expenses, research and development, and both companies can benefit from having more information sharing.
Above is a long term chart of Ford’s stock. The stock enjoyed the benefits of the dot com bubble, trading to an all-time high of $37.41 on April 19, 1999. Ford’s stock topped shortly after, forming a bearish divergence pattern, as indicated on the chart by the purple circles, where the stock makes a higher high in price but the Relative Strength Index makes a lower high. While doing so, the stock began to form a Head and Shoulders reversal pattern. Traders and investors sometimes look at Head and Shoulders patterns as an end to the current trend which can, at times, lead to a reversal, as occurred in Ford’s case.
Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Ford’s case, one would take the top price from the head of the pattern (roughly $37.50) and the price of the neckline from the pattern (roughly $21.50) then subtract them to get the difference ($16). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move: Neckline – Difference = Measured Move. In Ford’s case, the projected price target from the Head and Shoulders pattern was roughly $5.50, which it achieved in the third quarter of 2008.
Ford’s stock found support in 2009, when then-Chairman of the Federal Reserve, Ben Bernanke, announced the beginning of the Federal Reserve’s quantitative easing policy, which would continue for almost a decade. The stock did, however, find life again and broke above its ten-year long downtrend in the third quarter of 2009 to rally over 2000%, finding resistance around the $20.00 price level. The stock has been trading in a range between the $20.00 and the $7.00 price levels over the past decade. Currently, the stock is finding resistance at the 100-week Moving Average.
(Chart above courtesy of www.tipranks.com )
Based on a survey of 10 analysts offering 12-month price targets, the average price target for Ford’s stock is $11.68. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $10.44.
Ford and Volkswagen aren’t the first automakers to collaborate together. General Motors and Honda joined forces already, along with BMW and Daimler, to create autonomous and electric vehicles. Ford’s stock performance has not been the greatest over the past 20 years but it has survived through times of hardship and continues to maintain a very loyal investor base. Investors in Ford should look to their next earnings release on July 24th for fresh news on the company.