This morning, China and the U.S. scheduled a trade war meeting for October.
And as of midday, the market continues to roar in approval, potentially going overboard amid a “buying frenzy”.
But can you blame investors for getting excited? Should the talks end up being productive, the market’s number one stressor could finally disappear.
Whether that will actually happen or not remains to be seen, but for the time being, bulls are happy to ride this new wave of optimism; partially generated by news out of Hong Kong yesterday as well.
And so, nearly every stock is “up” across the board, pushing the major indexes into breakout territory as well – something we predicted late last week.
I’m not here to brag, though. Instead, I want to talk about a stock that could use this newly found momentum to soar even higher in September.
Best of all? Despite the two-day rally, share prices still appear significantly oversold.
In the weekly candlestick chart above, you can see that good ol’ Ford Motor Co. (NYSE: F) is at it again, as shares attempt to recover from their mid-July sell-off.
A higher low has been set relative to the low of December 2018 and contact with the lower Bollinger Band (BB) has just been made.
Which, if you remember, is a great sign that share prices could be headed north, as 90% of a stock’s price movement typically occurs within the constraints of the BBs.
And while that’s all well and good, we also need to be aware of the double top that’s formed over the last few months.
For those of you that are unfamiliar, double tops often precede trend reversals. Up until May, F looked like it was headed on a serious uptrend.
At least, until the selling started. In July, the uptrend got derailed as share prices plummeted.
But now, after hitting the lower BB and setting a higher low, we could have a trend continuation on our hands.
Or, we might not. The resistance being provided by the double top should be highly influential on F’s future price action, meaning that bailing out of a long position around that double top might make sense.
Provided that an upside breakthrough doesn’t occur, of course.
Because if it doesn’t, then F shares will have formed a triple top – an even stronger indicator of a trend reversal to the downside.
However, with our trade trigger shown in the chart above (at $9.48), F still has plenty of room to run. There’s 11% worth of gains between the trigger point and the mid-July high, meaning that there’s ample opportunity to generate significant profits.
Especially with an appropriately priced and dated call option.
So, will F shares keep rising?
It certainly seems likely at this point, provided that China and the U.S. maintain the trade war resolution hype. Like it or not, we’re in a “buy or sell the news” market, where everyone’s an expert and knows exactly what’s coming next.
What the “savvy” investors won’t tell you, though, is that their portfolios are now commanded entirely by President Trump’s Twitter account. As far as I’m concerned, that’s a terrible way to trade, and completely unnecessary if you’re willing to do the analysis.
Like we just did with F, in what could be a very impressive September for stocks.
