(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Ford Motor Co. (F) could be set to rise by nearly 30 percent after shares started reversing in late 2017. The stock has recently broken out of a multi-year downtrend, and that could set the stage for Ford shares to rise to about $18 from its current price around $13.50, based on an analysis of the technical chart and the options market. 

The technical breakout and potential rise is undoubtedly a different take when looking at the company's fundamentals, which offer investors little to no earnings and revenue growth through 2019, based on consensus estimates provided by YCharts. The technical breakout could suggest that investors are beginning to anticipate a turnaround in Ford's fundamental picture. 

A Turn For The Better?

 

 

The chart above shows the multi-year downtrend which started in July 2014, leading to a decline of nearly 37.5 percent from peak to trough. The chart also shows how Ford's stock crossed above the upper bound of the channel in October 2017, which has helped shares to rise by nearly 10 percent from roughly $12.25 to approximately $13.50 over the past couple of weeks. 

A Pause

 

 

The second chart shows how the relative strength index has started trending higher, but is also trading at levels that could be an indication that the stock's rise is likely to be slow. (See also: Ford Motors Top 3 Shareholders.)

The chart illustrates a sharp increase in the RSI when the stock lifted from roughly $10.50 to $12.50, followed by a period of consolidation, allowing the RSI to decline. When the RSI rises above 70, it is a sign that shares may be overbought. And that could lead to a decline in the stock's price or to a period of sideways trading. This allows the RSI to fall, and the stock price to then resume its uptrend. 

A Look At The Options

The options market suggests Ford shares could be on the rise as well, using options set to expire on January 18. The $12 calls have an open interest of over 80,000 contracts. And with the calls trading at roughly $1.80, it would mean the stock would need to rise above $13.80 by expiration to have a profit, and has a notional value approaching $15 million. The $12 puts, on the other hand, have an open interest of about 57,000 contracts and trade at approximately $0.75, and has a notional value of nearly $4.3 million. 

For now, the markets seems to be tipping its hand that see better days ahead for Ford and its stock. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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