Sometimes it’s important to drive home a point. And right now that’s the case for making nice risk-adjusted profits in car stocks Ford (NYSE:F), General Motors (NYSE:GM) and Tesla (NASDAQ:TSLA). Let me explain.
At the tail end of May, I wrote a piece on car manufacturers F, GM and TSLA. The focus stepped away from the headline blanket trade war risks with China, Mexico and the European Union. Honestly, who knows how any of that will play out? Instead, readers were urged to embrace the charts of these car stocks as each told a different story about the company’s future prospects.
In the interim a lot has happened on the geopolitical front. Tariffs set to be imposed against Mexico were quickly yanked by a bullying POTUS before the ink even dried on the directive. Yeah, I’m sure that was easy to see — after the fact. And of course, this week the G-20 summit has finally arrived with tensions ever high and no resolutions or temper tantrums as of this writing.
Still, as far as the price charts are concerned and as we’ll show below, F stock remains in gear for bulls, GM shares have quickly turned the corner as a buy — and TSLA stock is finally positioned as an opportune short.
Ford (F)
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Since the end of May, shares of Ford have continued to drive well. This car stock found monthly chart support off a potential downtrend line dating back to early 2018 and has subsequently moved higher. And with June’s trading nearly finished, an inside candlestick bodes well for continued upside.
What I’d recommend for F stock is to enter shares on a breakout move through the April and May high of $10.50. On the upside I’m revising my forecast. I now see a test of 2018’s high of $12.17 as a first target for taking profits if this auto stock manages to make a new relative high in 2019.
In the event this car stock triggers long but reverses lower, a stop-loss beneath $9.90 is sufficient leeway on and off the price chart to avoid any fatalities.
General Motors (GM)
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The second in our list of car stocks is General Motors. The monthly chart shows GM has established a solid reversal pattern in June that’s completely countered May’s test of key lateral price support. What’s more, stochastics has improved over the period and appears ready to confirm higher prices with a bullish crossover likely in the cards.
In GM stock the suggested way to position long is to buy shares on a second re-crossing of the May candlestick high of $38.78. That’s less than 2% away and allows for decent affirmation of the uptrend and possibly a full-fledged stochastics signal in this auto stock.
To protect the position in GM stock, I’d recommend taking profits at $46. That would mark new highs, but lines up with a bit of channel line risk which might come into play. On the downside, a stop-loss of $3.00 or below $35.78 looks appropriate. The exit is well-placed just south of the 50% retracement level for June and keeps risk contained to less than 8%.
Tesla (TSLA)
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The last of our car stocks is Tesla. The days of Wall Street forgiving the EV upstart are over and in our view TSLA stock now looks like an opportune short. An anticipated counter trend or bear market rally out of May’s oversold plunge has put TSLA back into an area where former key trend support should act as significant resistance worthy of turning TSLA lower.
In TSLA stock, I’d recommend simply shorting shares today. Tesla is, of course, not for the faint of heart. As much, I’d also recommend sizing the position appropriately to reflect risk of 11%. That puts the exit at $247.50. The short cover is slightly above the weekly chart’s intersecting trend lines, as well as narrowly through the prior trend’s monthly pivot low from April 2018.
Bottom line, if we’re right in seeing more persistent bearish pressure on this car stock, there’s going to be some nice profits down the road. Opting for safety features though, always makes sense. As much, I’d use the 62% retracement level near $158 as a guide for taking profits.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
