The drama with Toyota (TM) has intensified this week with sharp and skeptical Congressional scrutiny. I have been impressed at how (relatively) well Toyota’s stock has held up through the negative news flow. As Toyota’s president Akio Toyoda pleaded for mercy on Wednesday – “My name is on every car…You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers” – TM gapped up 3.9% on heavy buying.
As shown below, the technical picture is looking more and more like a (near-term) bottom.
*Chart created using TeleChart:
If Toyota’s stock somehow manages to break the February lows, it becomes a very attractive short (with a tight stop above former support). However, the news flow will have to get materially worse to force the stock through that point, and it seems the drama is finally reaching some kind of crescendo. One factor working against Toyota is the aggressive strengthening in the Japanese yen. The U.S. dollar currently trades at 89.6 yen and at 11-12 highs against the pound and the euro respectively, despite Japan’s preference for a weaker currency to support its struggling export sector. Persistent strength could further crimp Toyota’s profits.
Be careful out there!
Full disclosure: long USD/JPY, TM calls