Fast Fall for Ford Shares into Key Target

Sep 30, 2014: 10:01 AM CST

Ford shares (F) broke a critical support level and collapsed instantly toward the current key level where we’ll be watching for a reaction.

We can study this textbook example (of a sudden yet telegraphed market reversal) as we focus on the current pivot support.

Here’s the Daily Chart with breakdown:

Shares rallied most of 2014 from the $14.25 level toward the $18.00 per share “double top” peak.

Price rose for a “Last Gasp” rally to start September after the full test of the $18.00 per share resistance.

Note the lengthy negative divergence in both momentum (3/10 Oscillator) and volume along with the “Kick-Off” new momentum low to start August – these are classic signals ahead of likely market reversals.

Again, price bounced up to test the prior high yet fell shy in a “Failure Test” or what I like to call a “Last Gasp” rally ahead of the sell-off or collapse in price.

While selling pressure was strong going into September – and volume showed clear distribution signals – the selling did not reach a fevered pitch until shares broke the rising 200 day SMA and the $16.00 per share confluence.

This is when bears became aggressive as buyers liquidated positions rapidly.

We can see the picture expanded – and the current price level to watch – as seen on the Weekly Chart:

While there’s a lot to see, let’s focus our attention first on the lengthy negative momentum divergence that took place throughout 2013 (another good example).

Shares retraced all the way back to the key pivot point – the 38.2% Fibonacci Retracement Level – which is exactly the same level that we’re watching currently as shares challenge this price once again.

The 2014 rally took price back to $18.00 as reversal candles formed (along with the Daily Chart Divergences) which set the stage for a potential sharp sell-off.

The sell-off was more violent/volatile than expected and once again shares challenge the $14.50 key support level.

Our focus should be on assessing whether another “Support Bounce” rally can emerge off this key inflection point (bullish short-term if so) or else if sellers continue the momentum and distribution of shares which opens up additional sell pathways toward $13.50 and perhaps the $12.50 per share level.

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Corey Rosenbloom, CMT
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