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Prior to Tuesday's 1.4% rally, shares of UPS (UPS) - Get Free Report were tracing out a month-long pullback. Heading into next week's earnings report, the stock is now beginning to set up well for a fresh rally leg. The healthy pullback appears to have ended, indicating investors are gaining confidence ahead of Tuesday's news.

From early July through early November, UPS was stuck in a narrow consolidation pattern. A jolt was needed to break the trend, and on Nov. 8 UPS received that powerful jolt. The broad transport breakout that day help lift the stock more than 2% as volume soared. UPS finished the session at new 2016 highs and moved steadily higher over the next four weeks.

As shares reached $120 and entered deeply overbought territory, it was clear the upside momentum had eased and a pullback was ahead. This process worked off all of the overbought moving average convergence/divergence excess, while the stock drifted back down to major support.

This week, UPS has firmed up dramatically. Heading into earnings, the stock is on solid footing, with multiple layers of support underneath. Positive news next Tuesday could easily spark a return to the 2016 highs. Until then, UPS is near a fairly low-risk buy zone. This area runs from $114.10 to $113.50.

A close below $113 would take out the January lows, indicating more downside is on the way.

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This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.