We’ve opened a bearish trade on auto giant Ford (F) before the stock looks to break the current bearish pennant and continues its decline.
We like a bearish Ford trade at this point as investors are distracted by the Fed, which will release its latest FOMC meeting minutes at 2:00 p.m. EST on Feb. 17. Market players aren’t thinking as much about the dismal numbers coming out of Europe or those that are due to be released from China following its new year.
Ford’s growth areas are in Europe and Asia. However, economic contraction has put that growth at serious risk. A negative outlook and selling among the momentum stocks in the group, such as Tesla (TSLA), should weigh on prices for a break from the stock’s pennant pattern.A weaker dollar recently may be giving Ford some support, but selling is expected to continue as the dollar’s slide cools off.
‘Buy to open’ the Ford March 11.75 Puts (F160318P00011750) for a maximum price of $0.72.
There are several expiration dates available for the March series so, to be clear, these are the regular monthly options that expire on March 18, and the strike price is $11.75. These options are just slightly in the money, as Ford shares are trading at about $11.60 as of this writing, and we are recommending the $11.75 strike.
Due to the volatile nature of many of the news-based trades we take, especially those that involve earnings announcements, we don’t set profit targets for our options when we enter new trades. Instead, we watch the underlying technical clues of the stock, so we will be watching the chart for Ford very closely to tell us when to exit the trade.
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.
