UPS Delivers and Stock Sent Higher - What the Charts Say

United Parcel Service didn't just beat earnings expectations, it crushed them both on the top- and bottom-lines. Here's how to trade the stock now.
Author:
Publish date:

Shares of United Parcel Service  (UPS) - Get Report were flying on Thursday, up more than 15% after better-than-expected earnings.

The move was vaulting shares to new all-time highs, as high demand from healthcare and residential shipments drives steady demand. With Amazon.com  (AMZN) - Get Report earnings on deck for Thursday after the close, investors will likely hear about strong e-commerce demand that helped to drive UPS’s strong results.

Non-GAAP earnings of $2.13 a share beat expectations by $1.05 a share, while revenue $20.46 billion grew 13.4% year over year and obliterated estimates by more than $3 billion.

The results follow the better-than-expected report from FedEx  (FDX) - Get Report earlier in the month, as shipping demand remains elevated.

Based on the price action from Thursday - with UPS already having its highest volume trading day since September 2012 - the bulls are quite enthusiastic over the report.

Amazon is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now.

Trading UPS Stock

Daily chart of UPS stock.

Daily chart of UPS stock.

With the strong open, shares gapped higher by more than 11% and have gained momentum since. Also paying attention to the open, UPS stock began Thursday’s trading session right at the 138.2% extension.

Keep in mind, this extension comes from the March low to the November 2019 high, which is the 52-week high for UPS.

After a brief rally above $145, shares are recoiling a bit, which has given us an excellent trading range. On the upside, I want to see if UPS stock can take out its post-earnings high at $145.50 and trade up to the 161.8% extension near $147.

A close above the latter puts the two-times range extension on the table at $162.54. While it may take a little while to reach this target — if UPS can reach it at all — it’s a reasonable trim spot should it get there.

On the downside, I am watching the $138.2% extension and the session low at $135.15. Below that mark could accelerate some of the selling pressure, putting the potential for a gap-fill down toward $125 in play.

After such a strong earnings report, I wouldn’t expect robust selling pressure. It would have to coincide with a new company-specific development or a market-wide selloff.