Best of the Week

Charts Analysis Focus on U.S. Auto Makers, Ford, Toyota and Honda

Companies / US Auto's Nov 30, 2010 - 01:10 PM

Best Financial Markets Analysis Article In our Webinar last night we reviewed some of the automakers, beginning with Ford (F), which is a beautiful chart.

Since the beginning of last year Ford has emerged out of the bottom of a head and shoulders pattern that has taken it from around 1 1/2 to 17 1/2. Would I buy it here (Monday’s close at 16.06)?

I think it could probably pull back towards 15-15 1/4, where I’d enter and look for it to go to the top of the channel around 19-20. While it may pullback temporarily from there, you can see where Ford potentially could be going by looking back at 1997-98, when it was above 35.

It’s conceivable that just as the whole sell-off after its 1998 high was a distribution top, Ford has emerged out of an accumulation bottom with a larger pattern developing to the upside. Once above 17-17 1/2, there’s not a lot of resistance left. The huge pattern from 2002 to the present, going forward dwarfs the top between 1998 and 2001. So Ford is probably going to be high on the list of every institutional fund manager going forward. Every dollar or dollar and a half it pulls back will likely be met by buyers.

We like Ford better than General Motors (GM) because the chart, of course, has more history. It’s hard to say where GM will head from its offering on November 18. But it’s noteworthy that the stock has gone down to its 33 offering price three times and held. If this triple bottom breaks, the sell-off could be a waterfall. The key is for GM to take out its 33.85 high, and if it does that then I think it’s going to 34 1/2.

The Japanese automakers are looking strong, and could get stronger if the yen, which was grossly overvalued, continues to turn down relative to the dollar and makes Japanese exports more attractive. I’m long the dollar versus yen via the ProShares UltraShort Yen ETF (YCS) as a believer in the scenario.

It appears the Toyota (TM) chart is foretelling the same. With all its problems, Toyota looks great. It has a beautiful base from around 67 1/2 to around 74, and has measured move target at 80. It could get to 90 before it finds serious resistance.

Honda (HMC) has an unbelievable chart in terms of accumulation with a big multi-year head and shoulders bottom like Toyota. If it can sustain above 38, the neckline of the pattern, it will have one wicked move that can go to 45.

Nissan (NSANY), too, looks good. So we have reason to believe based on what these auto manufacturers and exporters look like in Japan that something is going on.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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