Ford stock enters buy territory after a brief consolidation

Ford Motor Co. NYSE: F by mid-session on March 22, shares had risen nearly 7% for the week.

The move follows news that the federal government has acknowledged reality regarding electric vehicle sales. The government has backtracked on previously proposed rules under which automakers reduce production of internal combustion engine vehicles or risk heavy fines.

A look at the Ford Motor chart shows the stock forming a cup-shaped base below the resistance at $15.42.

The stock surpassed the short-term resistance around $13; for investors looking for an early entry point, the stock is currently in a buy zone.

Ford Cruising above 50-day average

Ford shares are currently trading 6.8% above their 50-day moving average. While this is an indicator of rapid price movement over a short period of time, in this case it does not signal that the stock is extended. That’s because there is still a lot of work to do before Ford reaches the previous high of $15.42.

A colleague of the large automaker General Motors NYSE: GM it also recovered from a consolidation and is actionable.

On the General Motors chart, you can see the stock rising above a buy point north of $41.80 in a consolidation that began in February 2023.

Regulatory change strengthens auto stocks

On the GM chart, you can also see that the upward movement increased on March 15 as rumors about easing mileage requirements began to circulate.

In fact, GM and Ford shares both outperformed the SPDR Consumer Discretionary Select Sector fund NYSEARCA: XLY in the last five sessions.

General Motors has led consumer discretionary stocks for the past five sessions, with Ford in fifth place.

Analysis of Ford Motor’s recent performance

Ford shares have languished since early 2022, although there have been some tradable rallies since then. Earnings growth has slowed over the past two years, and Wall Street expects earnings to decline this year and next.

You can track this trajectory using Ford Motor earnings data from MarketBeat.

It wasn’t just Ford and GM that saw improvements; Stellantis NV NYSE:STLAmanufacturer of the Chrysler, Dodge, Jeep and Ram brands in the United States, as well as several international brands, including Alfa Romeo, Peugeot and even Maserati, recorded significantly higher results.

Here’s what drove the positive momentum: On March 20, the Biden administration significantly reduced its goals for electric vehicle adoption. Original proposals called for 67% electric vehicle sales by 2032, but because the auto industry and auto union members objected, the administration cut those goals down to 35%.

Concerns from car manufacturers and unions

Given that the state of Michigan is a political battleground in a presidential election year, the administration was sensitive to union members who rightly pointed out that they would lose jobs and see lower wages if wage rules electric vehicles had been implemented.

For their part, automakers pointed out that consumers have not rushed to buy electric vehicles at the pace Washington expected. High costs and unreliable charging stations are among the factors dampening buyer enthusiasm.

Hybrids remain popular

However, hybrid vehicles like those from Toyota Motor Corp NYSE:TM The Prius remained popular. Drivers currently want the convenience of walking into a traditional gas station to refuel, rather than worrying about finding a charger. However, the popularity of hybrids also indicates that consumers are interested in reducing gas consumption.

The auto industry needs more time to figure out how to preserve union jobs and at the same time work to meet environmental standards.

The rise in Ford, General Motors and Stellantis stocks indicates that investors are relieved by the easing of the rules.

The regulator simplifies standards

The Environmental Protection Agency’s revised standard allows automakers greater freedom to meet emissions standards with gas-electric hybrids like the Prius.

Its final rules give the green light to automakers to build traditional internal combustion engine vehicles through 2030 and still meet fuel economy requirements.

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