United Parcel Service (UPS - Get Report) is a buy down to its monthly and semiannual pivots at $117.29 and $116.12, respectively. The stock is also above a key Fibonacci Retracement level on its weekly chart.
UPS is expected to report earnings on Tuesday.
UPS has been outperforming FedEx (FDX - Get Report) so far this year as several factors come into play. UPS has a relationship with the U.S. Postal Service. Go into a UPS store and you have shipping options. Sometimes it is cheaper to send via USPS rather than UPS. FedEx is no longer delivering packages for Amazon.com (AMZN - Get Report) , which makes FedEx a laggard. UPS also is in bull market territory while FedEx is in bear market territory.
UPS closed last week at $117.35, up 20.3% year to date and in bull market territory 30.5% above its Dec. 24 low of $89.89. The stock is just 5.1% below its 2019 high of $123.63 set on Sept. 12. Longer-term the stock set its all-time intraday high of $135.53 during the week of Jan. 19, 2018. This was the high following a 55% bull market gain from its low of $87.30 set during the week of Jan. 22, 2016. The weekly chart below analyzes the Fibonacci Retracement levels of this gain.
Analysts expect UPS to earn $2.05 a share when it reports earnings before the open on Tuesday. Fundamentally, UPS is fairly valued with a P/E ratio of 16.65 with a favorable dividend yield of 3.24%, according to Macrotrends. International package deliveries could be a drag on earnings given the weakening global economy and the trade war with China. A positive is improved efficiencies in e-commerce deliveries to homes in Main Street, USA. UPS appears to be on track to slow the growth of its cost per piece delivered and even reduce it. Guidance on expectations for the 2019 holiday shipping spree will be a key to this earnings report.
The Daily Chart for UPS
Courtesy of Refinitiv XENITH
The daily chart for UPS shows that the stock ended 2018 at $97.53, which was an important input to my proprietary analytics and the annual risky level is my upside target at $124.81. The mid-year close of $103.27 was also an important input to my analytics. Its semiannual pivot is $116.12 which is the low end of my buy zone. The close of $119.82 on Sept. 30 was the latest input to my analytics. The monthly pivot for October is $117.29 with the fourth quarter value level at $101.90.
The Weekly Chart for UPS
Courtesy of Refinitiv XENITH
The weekly chart for UPS is neutral with the stock above its five-week modified moving average of $112.37. The stock is above its 200-week simple moving average or "reversion to the mean" at $110.01. The 12x3x3 weekly slow stochastic reading is projected to slip to 68.53 this week down from 73.72 on Oct. 18.
The horizontal lines are the Fibonacci Retracement levels of the rally from the January 2016 low of $87.30 to the January 2018 high of $135.53. The stock is holding its 38.2% retracement at $117.15 which targets its 23.6% retracement of $124.18. These levels line up with my key levels. The 50% retracement is $111.47.
Trading Strategy: Buy weakness to the monthly and semiannual pivots at $117.29 and $116.12, respectively, and reduce holdings on strength to its annual risky level at $124.81.
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How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October as monthly levels change at the end of each month.
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.