Detroit is best known for cars. Yet, when it comes to finance, few in the local media cover the auto industry sufficiently for traders, except to say the auto stocks are up or down for the day. That will change, because this post will now research the auto stock charts and report on them and their suppliers using technical analysis of price-time charts. It will be helpful to coordinate this article with the slideshow of the charts shown on the left.
The list of candidates will start with the obvious, like local GM, Ford, Chrysler (when they trade publicly again), Toyota, Nissan, who also have tech centers here in Michigan. I will then expand the list to include suppliers like American Axle, Lear, JCI and others. Whether they have headquarters here in Detroit is irrelevant. The auto industry in Detroit is connected globally. So, anything connected to autos is fair game. Today, though, we’ll start with GM, Ford and Toyota.
Basis for Analysis
Since stock technical analysts deem the stock fundamentals are already reflected in the stock price, I will focus primarily on the dynamics of price using technical analysis. The sole purpose will be to ascertain the present bias of the trend based on my own set of criteria. As a practicing day trader and swing trader, that means I will view the day charts as well as 10-minute intraday charts for these signals.
Occasionally, it will be necessary to track the weekly and possible get an overview of the monthly charts. That will be the exception, though, not the rule; because day trading and swing trading are short-term focused. Even if you are a long-term investor, you will still benefit by being privy to support and resistance levels to coordinate your own entries and exits.
The system criteria will be the same as what’s used in my index analysis. I will use the Time Series Forecast indicators in lieu of moving averages because they do not lag. They are based on multiple points of regression analysis; meaning they are statistically based.
Trend bias signals will show up as a “B” for buy (long), but will never imply buy right now. It will always mean the trend bias leans toward the buy or long side. Likewise, a “S” trend bias signal will never imply sell right now, but the bias of the trend is toward the sell or short side.
Then we will use the open of every signal as primary support or resistance. A “B” will be considered unconfirmed until the low of a future bar passes the high of that signal bar. A “S” will be considered unconfirmed until the high of a future bar trades below the low of that signal bar. Whenever those conditions occur, we will raise or lower the support or resistance, and continue until the trend bias tells us to change. It’s that simple, and I will walk you through it.
General Market Assessment: The general market indexes like the Dow and the S&P 500 lead most stocks. Seldom will an auto stock buck their trend, but when they do, be aware it’s significant. Be apprised that stocks can often sell off during option expiration week.
General Motors (GM:NYSE) The IPO opened at 35, traded as high as 35.99 and as low as 33.07. There isn’t enough history to go on here except these upper-lower limits. The trend bias is short only because of the “S” signal which traded below the channel. The sell signal was also confirmed on Thursday when the high traded below the signal bar low. Therefore we have a confirmed “Sell” until further notice and based on next week’s option expiration dynamics, but with strong support at that 33.07 low.
Ford (F: NYSE) Ford is another story. Closing Friday at 16.74, we have an unconfirmed “B” signal. The stock has been in a trading range for the past 20 days, but the “S” signal on Tuesday was also a breakout of the channel and broken previous bullish support level at 16.72. So, that is still a strong bias to the downside, at least for the short term.
That also means Friday’s “B” signal is not strong, especially since the channel was not broken, So, the “B” action is undetermined at this point. We will know better next week. If you are an option player, a straddle may be in order.
Toyota (TM: NYSE) is the highest price of the three, closing Friday at 77.26. Fundamental issues have hit the stock, but technically the trend bias has been bullish until we got a “S” signal on Tuesday and broken channel, a powerful signal in that it also broke bullish support at 78.04. Then on Thursday the “S” signal day low was passed by a lower day bar high, which confirms our “S” signal and lowers resistance to Thurs open at 78.67. So, until further notice, TM is under a definite sell trend bias.
Examiner Final Comments
That’s all for now. I will report a least once or twice per week, and maybe everyday if the market action warrants it. Hope you enjoy the added local auto stock feature.
About Frank Sherosky: After 39 years in the auto industry as a design engineer, Frank is now a full-time trader, writer and author of articles, books and ebooks, like “Perfecting Corporate Character” and “Awaken Your Speculator Mind”. Aside from his duties as the Detroit Day Trader Examiner, he also writes as the Detroit Automotive Technology Examiner and for TorqueNews.com. You may visit his author website at http://www.AuthorFrank.com