Its six-month low of $150.68 was set on June 3. My call is to buy weakness to these levels on a potential double-bottom. The stock is suffering some bad news recently, but daily and weekly charts suggest that FedEx can survive this minor downside risk. A positive reaction to earnings released after the close on Tuesday, June 25, can spark a weekly close above its five-week modified moving average at $167.11, which would shift the weekly chart to positive to confirm the double-bottom. The upside is to the "reversion to the mean," which is the 200-week simple moving average at $194.74.
For another take, check out Real Money's Analysts Seem to Expect Further Disappointments From FedEx - Charts Not So Much
FedEx, the worldwide package delivery giant ended last week in bear market territory 36.2% below its 52-week intraday high of $259.25 set on Sept. 17. Its all-time intraday high of $274.66 was set during the week of Jan. 19, 2018. The stock is up just 2.5% year to date and is 9.7% above its June 3 low of $150.68.
Analysts expect FedEx to report earnings of $4.81 to $4.95 per share when they report after the closing bell on Tuesday, June 25. The stock is fundamentally cheap with a P/E ratio of 10.06 and a dividend yield of 1.57%, according to Macrotrends. One of the issues is that the dividend will not be raised ending a 10-year period of increasing dividends. The company has also missed earnings-per-share estimates for the last three quarterly earnings reports, which account for share price weakness and a potential double-bottom. On June 23, the company confessed to an operational error that prevented a Huawei package to be delivered to the United States. Missed deliveries from Huawei also occurred in late-May and FedEx may now be added to China's "unreliable entities list." Wall Street cautions about struggling volume trends, issues with its aircraft fleet and e-commerce problems. Keep in mind that on June 7, the company announced that its Express domestic contract for Amazon.com (AMZN) - Get Report deliveries would end. Some say that this could improve margins.
The Daily Chart for FedEx
Courtesy of Refinitiv XENITH
FedEx has been below a "death cross" since Aug. 8 when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. As this signal formed, investors had several opportunities to sell the stock at its 200-day SMA when it was as high as $247.20 on Sept. 18 after that earnings miss. The "death cross" tracked the stock to its Dec. 26 low of $150.94. Dec. 26 was a "key reversal" day as the stock closed at $160.15 above the Dec. 24 high of $157.73. The stock closed Dec. 31 at $161.33, which was an important input to my proprietary analytics. The stock still has an annual risky level at $218.11. The stock is well below its 50-day and 200-day simple moving averages at $173.84 and $193.44, respectively.
The Weekly Chart for FedEx
Courtesy of Refinitiv XENITH
The weekly chart for FedEx will shift to positive if the stock ends this week above its five-week modified moving average of $167.11, which would target its 200-week simple moving average or "reversion to the mean" at $194.74. The 12x3x3 weekly slow stochastic reading rose to 21.51 on June 21, up from 19.98 on June 14, rising above the oversold threshold of 20.00. This week's projected level is 23.71. The horizontal lines represent the Fibonacci Retracement levels of the 129% bull market from a low of $119.71 set during the week of Jan. 22, 2016 to the all-time intraday high of $274.66 set during the week of Jan. 19, 2018. Note that the 2019 high of $199.32 set on April 18 was a failed test of the 50% retracement level at $197.12.
Trading Strategy: Buy weakness to the double-bottom lows of $150.94 and $150.68 and reduce holdings on strength to the 200-week SMA and 50% retracement at $194.74 and $197.12, respectively.
July 4th Sale: Join Jim Cramer's Club for Investors and Save
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level changed at the end of January, February, March, April and May. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
The close on June 28 is the second most important for 2019. This close is an input to my proprietary analytics and will generate new weekly, monthly, quarterly and semiannual levels.
How to Use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.