Ford (F) has seen a great support in the 16-area over the past few days and bounced nicely off of the 20-day moving average yesterday. From the fundamental point of view, it is in a great position, led by its great CEO Alan Mulally. Ford’s unit sales have surged 21% so far this year compared with 2009 to easily outpace the broader industry’s growth rate.
I expect F to challenge its 52-week high of 17.42 in the near future. Investors with longer time horizon can go long F shares at this point.
If you believe that F can run up to the 19-level by Jan 2011, you can buy the Jan 2011 16/19 CALL spread for 1.10 debit. This trade risks 1.10 for a potential profit of 1.90 by Jan 2011 expiration (~170% return in 50 days) if Ford shares jump 13% from the current level in that timeframe. The break-even price is 17.10 on Jan expiration.
(Full Disclosure: Author long F shares at the time of writing)
