The automakers tend to suffer in the short term after Fed Days
Car stocks Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) could stall in the short term, if recent history is any indicator. Specifically, the Detroit darlings have been among the worst stocks to own after Federal Open Market Committee (FOMC) meetings, the next of which is set to conclude with a rate hike on Wednesday, Sept. 26.
Below are the worst S&P 500 stocks to own after FOMC policy meetings, going back to 2015. After these Fed Days, Ford and GM shares have been higher the subsequent week just 31% of the time, and have averaged a one-week loss of roughly 1.2%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.
Ford Faces Round-Number Resistance
Amid heightened U.S.-China trade tensions and concerns about the impact of tariffs on automakers, Ford stock has suffered in the second half of 2018, down roughly 20% since its early June peak of $12.15. In fact, F shares touched a six-year low of $9.22 on Sept. 11, extending a longer-term string of lower highs and lows that's encompassed the equity since 2014. At last check, the security was fractionally lower at $9.77, and the round-number $10 area -- which represents a 23.6% Fibonacci retracement of the aforementioned June high and September low -- has acted as a roadblock in recent months.
Despite the stock's fundamental and technical struggles of late, options traders have been upping the bullish ante. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) indicates that more than four F calls have been bought to open for every put in the past two weeks. The resulting call/put volume ratio of 4.19 is in the 92nd percentile of its annual range, suggesting traders have rarely preferred long calls over puts by a wider margin in the past year. Should Ford shares resume their longer-term downtrend, an unwinding of optimism in the options pits could exacerbate selling pressure.
GM Eyes Fibonacci Level
Similar to Ford, General Motors stock has been sliding since a June peak. Specifically, since skimming the $45 level on June 15, GM shares have surrendered roughly 20%, much of which was brought on by a July 25 bear gap stemming from the automaker's ugly full-year earnings forecast. What's more, the security hit its own annual low of $33.43 on Sept. 11, but was last seen 0.6% higher on the day, trading at $35.94 -- just below a 23.6% Fibonacci retracement of the aforementioned peak and nadir.
Although GM is on track for a fourth straight monthly loss, analysts remain upbeat. Of the 15 brokerage firms following the car stock, nine maintain "buy" or better ratings, with the rest doling out lukewarm "holds," and not a single "sell" to be found. Should the equity extend its second-half slump, a round of negative analyst attention could pressure GM even lower.
In conclusion, short-term speculators may want to steer clear of Ford and GM stocks, which tend to suffer after Fed policy meetings. Instead, traders should consider this pair of healthcare stocks, which tend to rally after Fed Days.