One of the most high-profile IPO events in 2015 was Ferrari NV (NYSE:RACE), selling 10% of its shares on the New York Stock Exchange in October. Piero Ferrari, Enzo Ferrari’s son, owns 10% of the company and the chance to own stock of one of the world’s most recognized luxury brands saw the price rallying 15% on their first day. The initial public offering saw Ferrari’s stock price above the proposed mid-point but then fell below its initial price of $52 in the following weeks. The stock is currently trading just above $40 at the time of writing. Ferrari delivered good results in Q3 2015; the company expects to report slightly over $3 billion in revenue for 2015, so why is the stock performing so badly?

Ferrari is also listed on the Milan Stock Exchange, trading at €37.32 at the time of writing; a break of resistance at €37.54 should see bullish momentum dominate. Only 10% of the shares have been made available to investors, with the remaining 80% owned by Fiat Chrysler shareholders. Lower liquidity explains the recent poor performance and it leads to more volatility in the stock price. Also, the ultra-exclusivity of its brand means that they sold just over 7,200 Ferrari vehicles in 2014. However, Chairman Sergio Machionne recently stated at the Detroit Auto Show that they may increase production to 9,000 a year by 2019. Also, it could be best to wait for Fiat shareholders to sell their Ferrari stock.

The chart below shows the 4-hour price action of Ferrari’s stock on the New York Stock Exchange. The Relative Strength Index indicates that the market is oversold, closing below 30 yesterday. A move back above 30 for the index should give confirmation of further buying interest. However, if the index carries on trending downwards, buyers are suggested to wait until the market has just moved out of the oversold region.

This week shows weak resistance provided by the thin portion of the cloud around $47.5 then for the following week resistance will be found at $46 to $48. A bearish outlook is also indicated by the fractal levels. The most recent buy fractal level at $42.10 has been broken and with no previous fractal supports left we could see an exaggerated downward move.