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Ford Motor Stares Down a Long-Term Roadblock

An F speculator extended their bullish option trade

by 11/27/2012 9:01 AM
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Since touching a multi-year low of $8.82 in August, the shares of Ford Motor Company (NYSE:F - 11.10) have rebounded roughly 26%. As such -- and despite long-term trendline resistance looming overhead -- it looks like one options trader is extending their bullish position to bet on continued upside for the automaker.

During the course of Monday's session, thousands of contracts changed hands at the December 10 and February 10 calls, mostly in blocks marked "spread." The largest block of front-month calls traded at the bid price of $1.13, suggesting they were sold, while the February-dated calls crossed at the ask price of $1.32, implying they were likely bought. Considering open interest skyrocketed at the February 10 strike, and remained relatively stagnant at the front-month strike, it appears the trader cashed in their short-term, in-the-money calls and bought longer-term calls at the same strike.

However, F is no stranger to optimistic attention in the options pits. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open more than four calls for every put during the past two weeks. Furthermore, the stock's 10-day call/put volume ratio of 4.46 ranks in the 73rd percentile of its annual range, implying that option buyers have initiated bullish bets over bearish at a faster-than-usual clip lately.

Elsewhere on the Street, the brokerage bunch is also in the bullish corner. The Detroit diva boasts 10 "strong buys" and two "buy" endorsements from analysts, compared to four lukewarm "holds" and not a single "sell" or worse suggestion. Likewise, the consensus 12-month price target on the equity stands at $14.67 -- representing expected upside of 32% to F's closing price on Monday, and in territory not explored since June 2011.

In order to live up to some of these technical expectations, though, the shares of F need to do something not accomplished in nearly a year-and-a-half: conquer their 20-month moving average, which has descended into the $11.50 area. However, should the security backpedal in the face of familiar resistance, its 80-month trendline -- lingering in the $9 neighborhood -- could limit losses.

Monthly Chart of F since January 2010 With 20-Month and 80-Month Moving Averages


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