FedEx Slips Before Earnings Report on Amazon Pressure; Charts Show Bottoming Patterns

Buy FedEx on weakness to its five-week modified moving average at $159.40 and reduce holdings on strength to its 200-week simple moving average, or reversion to the mean, at $196.26.
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FedEx (FDX) - Get Report reports earnings after the closing bell on Dec. 17 with the stock in a bottoming pattern on its daily chart. Its weekly chart has been positive for the past two weeks. 

My call is to buy the stock on weakness to its five-week modified moving average at $159.40 and reduce holdings on strength to its 200-week simple moving average, or reversion to the mean, at $196.26.

Analysts estimate FedEx earned $2.78 to $2.84 a share, but the Memphis package-delivery giant has missed expectations in three of the past four quarters. 

The stock is under pressure going into this earnings report after Amazon (AMZN) - Get Report blocked third-party sellers from using its ground-delivery service. The online retailer appears worried that its Prime members may not get delivery of Christmas gifts on time.

In my community I see more Amazon trucks than FedEx and United Parcel (UPS) - Get Report trucks this year. The bulk of home deliveries seem to be handled by the U.S. Postal Service and Amazon itself.

I live in Tampa Bay, Fla., and I took gifts to my local UPS store on Monday for delivery to my son’s family in New Jersey. UPS promised delivery on Friday, Dec. 20.

FedEx closed Monday at $164.10, up 1.7% year to date and in correction territory 18% below its 2019 intraday high of $199.32, set April 18. 

The stock is in recovery mode with a gain of 19% since its Oct. 9 low of $137.78.

Longer term, FedEx is consolidating a bull-market run. The stock traded as low as $119.71 during the week of Jan. 22, 2016, and more than doubled to its all-time intraday high of $274.66, set during the week of Jan. 19, 2018. 

This was followed by a bear-market decline of almost 50% from this high to the Oct. 9, 2019, low of $137.78.

Even as Wall Street continues to tout the longest bull market in history, investors must navigate significant up-and-down volatility. They can do that by reading the charts and using my levels to capture portions of this volatility.

The Daily Chart for FedEx

Chart shows a potential inverse head and shoulders bottom

Chart shows a potential inverse head and shoulders bottom

Courtesy of Refinitiv XENITH

The daily chart for FedEx shows the stair steps lower since the high of $274.66 set in January 2018. 

The horizontal lines are the key levels that formed during the year based upon monthly, quarterly semiannual and annual closes. 

The annual risky level for all of 2019 has not been tested during the year. The semiannual risky level for the second half, at $200.85, has not been tested either. 

The fourth-quarter pivot at $164.55 has been a magnet since Nov. 4. The monthly value level for December is $142.01, with this week’s risky level at $170.25, which is the upside target on a positive reaction to earnings.

The Weekly Chart for FedEx

This is a positive weekly chart

This is a positive weekly chart

Courtesy of Refinitiv XENITH

The weekly chart for FedEx is positive, with the stock above its five-week modified moving average of $159.40. 

The upside potential is to its 200-week simple moving average, or reversion to the mean, at $196.26. The stock has been below the reversion to the mean since the week of April 26. 

The 12x3x3 weekly slow stochastic reading this week is projected to rise to 62.3 from 56.43 on Dec. 13.

Trading Strategy: Buy weakness up to the five-week modified moving average at $159.40 and reduce holdings on strength to the 200-week simple moving average at $196.26.

Value levels and risky levels are based upon the past nine monthly, quarterly, semiannual and annual closes. The first set of levels was based on the closes on Dec. 31, 2018. The original annual level remains in play.

How to use my value levels and risky levels:

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 Nov. 29 established the monthly level for December.

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.