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Harley-Davidson Enters Bearish Territory After Tariff

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Harley-Davidson, Inc. (HOG) shares fell nearly 6% on Monday after the company said that European Union tariffs would add about $2,200 to the cost of the average motorcycle exported from the United States to the European Union. Management expects that tariffs would cost $30 million to $45 million over the rest of this year and could cost $90 million to $100 million on a full-year basis.

The company plans to shift the manufacturing of its motorcycles from the United States to international sources to avoid these tariffs on motorcycles destined for the European Union. While this will save the company money, some investors are concerned that it could draw criticism from President Trump if it’s seen as undercutting his policies and destroying American jobs. The new European Union tariffs are in retaliation to United States tariffs on European imports, including automobiles, which are a major source of income for Germany and other allies. (See also: Trade Uncertainty Already Hurting US Companies.)

Technical chart showing the performance of Harley-Davidson, Inc. (HOG) stock

From a technical standpoint, Harley-Davidson stock broke down from R2 support at $44.53 and the 50-day moving average at $41.93 to trendline and pivot point support at $40.90. The relative strength index (RSI) is moving toward oversold territory with a reading of 41.67, but the moving average convergence divergence (MACD) could see a near-term bearish crossover.

[To learn more about supplemental technical indicators such as the RSI and the MACD, check out Chapter 4 of the Technical Analysis course on the Investopedia Academy.]

Traders should watch for a breakdown from trendline and pivot point support toward S1 support at $39.18 or S2 support at $37.27. If the stock rebounds from these levels, traders could see a move higher to retest R1 resistance at $42.80 or R2 resistance at $44.53, although this scenario appears less likely given the bearish MACD crossover on Monday. The good news is that there could be some consolidation as the RSI reaches oversold levels before a further move lower. (For more, see: Top Mutual Fund Holders of Harley-Davidson.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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June 26, 2018

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