Ferrari NV (RACE)

 

Why Ferrari shares are as hot as their cars

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Why Ferrari shares are as hot as their cars

FERRARI (NYSE:RACE)

Some folk suspect trends can reliably predict the future. If this is so, apparently the Ferrari Formula 1 team probably face a pretty lacklustre weekend in Singapore as early trend signals are not great.

Of course, the folks who know about "stuff" predict Singapore is a weekend where Ferrari should actually do rather well, whereas Mercedes are not highly rated (our interest in F1 Fundamentals is showing!).

Ferrari (RACE) shares are currently trading around $109.94 and need only skid below $108.9 to confirm our suspicions as weakness to $102.6 looks viable. A movement such as this will prove dangerous as it's capable of triggering a further crash in the direction of $93.17.

To rubbish the suggestion, the share price requires better than $115.88, so there's the stop loss level for those who believe the red team are about to watch their world championship potentials race off into the sunset. Or, in the case of Singapore, the streetlight (for those who correctly ignore F1, Singapore is a night-time event).

However, there is always a "however".

If we draw a trend line from the last major manipulation against Ferrari back at the start of May (there's a theory these big gaps signify a new trend starting), any coming reversal down to the $93 level is liable to bounce from the trend line as, visually, there's a good chance the share price is simply gathering momentum for a future surge above its all-time high at $118.

Therefore, in theory, above $115.88 should start a trend to $129 next initially, but realistically we could dream of $142 in the future, assuming the team manage not to screw up the world championship.

If triggered, the stop could be $112, but we'd prefer to inject the fuel of sanity. Chasing a trade like this only becomes sane, should Ferrari actually better $118 again and, thus, an entry point above the prior high will present the safest option.

 

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Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.


Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.