2 Car Stocks Sinking on China Trade Announcement

Ford is testing potential support at its 50-day moving average

Apr 4, 2018 at 10:18 AM
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The U.S. stock market is plummeting today, after Beijing retaliated against Washington's threats of new tariffs by unveiling a list of U.S. products that will face stiffer import taxes, though it's not been announced when these will go into effect. Included on the list are automakers, and in reaction, shares of Detroit darlings Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) are trading lower.

Ford Motor Tests Key Trendline

Ford Motor stock is down 1.6% at $10.98 to test potential support at its 50-day moving average. This trendline served as a stiff ceiling in mid-March, but the shares reclaimed a foothold north of here during last Thursday's rally. More broadly, the shares are down 11% year-to-date.

Options traders have been betting on more upside, buying to open calls over puts at a quicker-than-usual clip in recent months. F stock's 50-day call/put volume ratio of 2.79 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 97th annual percentile.

GM Stock at Risk of Continued Short Selling

General Motors stock fell 2.7% at the open, but has since pared these losses to 0.6% to trade at $36.71, after the automaker issued a statement saying it "support[s] a positive trade relationship between the U.S. and China." Longer term, the shares gapped below their 320-day moving average in early March after a roughly 18-month run above it, with the trendline now serving as resistance.

Increased selling pressure from shorts has likely exacerbated GM's technical woes. Short interest shot up 13.2% in the two most recent reporting periods to 36.55 million shares. However, this accounts for a slim 3% of the stock's available float, meaning there's plenty of room on GM's bearish bandwagon.


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