Ford Motor Company (F) shares fell more than 4% during Tuesday's session after Moody's cut its rating on the automaker's bonds from Baa3 to Ba1 based on concerns over its balance sheet. The new rating makes Ford's bonds "junk bonds" as it grapples with weak earnings and a costly restructuring plan. The $11 billion restructuring is taking place as the company is struggling with both cash flow and profit margins.

Despite the downgrade, CreditSights said that the iconic automaker would remain in the Investment Grade Index (IG), even if both Standard and Poor's and Fitch downgraded the bonds to low BBB levels. A removal from the IG index could make it difficult for pension funds and other institutional investment funds to buy the company's bonds in the future, which could increase interest rates and decrease liquidity.

The most concerning near-term development for stockholders would be future downgrades from other credit agencies. That said, Bank of America analyst John Murphy believes that improved execution and communication may help Ford's multiple recover despite the downgrade, which is the rationale behind his decision to maintain a Buy rating on the stock.

Chart showing the share price performance of Ford Motor Company (F)
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From a technical standpoint, the stock briefly hit its 200-day moving average at $9.03 before recovering during the late-morning session. The relative strength index (RSI) remains neutral with a reading of 49.52, but the moving average convergence divergence (MACD) remains in a bullish upswing toward the zero line. These indicators suggest that the stock could still rebound higher, but the future is less certain.

Traders should watch for a breakdown from the 200-day moving average, which could lead to a retest of reaction lows of around $8.70 over the coming sessions. If the stock rebounds from the 200-day moving average, the stock could move higher to retest the 50-day moving average at $9.53 or close the gap to reach near its prior highs of around $10.20.

The author holds no position in the stock(s) mentioned except through passively managed index funds.