
Here's Why UPS Is a Buy on Weakness
Shares of United Parcel Service (UPS) - Get Report are trading at new 2016 highs today. The stock is up just over 0.50% as it extends the gain off the Brexit low to just over 7%.
This impressive move is beginning to put some distance a potentially major support zone. With this solid foundation developing underneath, UPS is set up well for a continued up trend.
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Back in late March, UPS began to show signs of upside exhaustion after surging over 20% off the January lows. This huge bull run lifted the stock back up to heavy resistance near the October 2015 peak. After a very shallow pullback, UPS put in a new high in April but was still unable to clear the $107 area.
Finally, in early May, a much-needed pullback was underway. By the middle of the month, after retracing a third of the rally off the January low, UPS was basing near the 200-day moving average. Once this bottom was complete in late May, investors began to regain confidence.
Just prior to the two-day Brexit flush, UPS was once again retesting major resistance near the $107 area. At the early morning lows on Monday, June 27, this zone was taking on a very ominous look. Now that UPS has convincingly cleared this area as the post-Brexit recovery continues, a major support zone is now in place.
In the near term, UPS bulls should consider the stock a very low-risk buy on weakness. A drift back down to the $108.50-to-$107 area would offer a low-risk entry opportunity. On the downside, a close back below $106.50 would violate last week's low and would put shares back in consolidation mode. On the upside, a logical upside target is the 2015 high of $114.35.
Adding extra fuel to the current bullish action is a relatively high short interest ratio of 5.5. It appears the UPS bears are feeling -- and will continue to fell -- the pressure.
Also of note, UPS is scheduled to report earnings on July 29.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.










