In the last week of April, Ford Motor Company (NYSE: F) reported a 35% y-o-y decline in the fiscal 2017 first-quarter net income. However, the non-GAAP earnings and revenues were higher than analysts’ estimates. Still, on May 4th, on the basis of poor guidance, we forecasted a decline in the stock. Additionally, we expressed our interest to buy a put option to gain from the downtrend. The stock was trading at $11.30.
In a week’s time, the stock fell to about $10.60. That ensured a profit from our position in the binary options market. Now, the stock has recovered to close at $11.30 yesterday. On the basis of the details provided below, we expect the stock of Ford to rally further.
The Dearborn, Michigan-based Ford reported retail sales of 152,395 vehicles in June, almost flat compared to the same period last year. Notably, Fleet sales, which includes corporate purchases, declined 13.9% to 75,583 vehicles. Overall, sales declined 5.1% y-o-y to 227,979 units in June. However, it was better than Kelley Blue Book’s (vehicle valuation and automotive research company) expectations of a 9.7% decline in sales.
Passenger car sales plunged 23%, truck sales increased more than 1%, and SUV sales rose 3%. Notably, F-Series sales jumped 9.8% y-o-y to 77,895. So far this year, Ford has sold 429,860 pickup trucks, up 8.8% on a y-o-y basis. Still, year-to-date sales in the US are down 3.8% to 1.30 million vehicles.
The automotive industry in the US registered a 2.1% y-o-y decline in sales in the first half of 2017. According to Autodata Corp., in the same period last year, the industry has sold about 8.45 million vehicles. More importantly, industry-wide, car sales are down 11.4% year-to-date. The industry is seeing a shift in customer preference for bigger vehicles, instead of smaller cars. Thus, considering the better than expected performance by Ford, fundamentally, the stock is expected to remain in a bullish orbit.
The stock has broken the resistance at 11.50. Furthermore, the bullishness is also indicated by the Williams’ Percentage Range indicator, which has entered into the bullish zone. So, an increase in the share price can be expected. On the upside, next major resistance is at 12.40.
We wish to trade a call option to make money from the uptrend. The preferred strike price and expiry dates are $11.50 and July 14th, respectively.
Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.
