NEW YORK (TheStreet) -- When FedEx (FDX) reports quarterly earnings before the opening bell on Wednesday, it will likely report Monday's deliveries set record numbers as Internet shopping continues to take market share from brick-and-mortar store sales. In addition, lower fuel costs this holiday season should boost the bottom line for a stock that set an all-time intraday high at $183.51 on Dec. 8. Here's what investors should focus on.
Analysts expect FedEx to earn $2.18 per share, but on Monday there have been calls for an earnings beat following the shippers ability to beat expectations the last two quarters by solid margins. This report is a key to resuming a Santa Claus rally as FedEx shares should show stuffed sacks of toys and goodies.
FedEx deliveries dwarf those for the U.S. Postal Service, which expects to process 640 million pieces of mail on Monday, and 12.7 billion between Thanksgiving and Christmas. Guidance from FedEx calls for 22.6 million deliveries on Monday and 290 million for the holiday season, up 9% from a year ago.
Since FedEx is a momentum stock let's look at the daily and weekly charts, then present the investment profile with exit strategies.
Here's the daily chart for FedEx.
Courtesy of MetaStock Xenith
The daily chart for FedEx ($176.67) shows how the stock held its 200-day simple moving average (green line) on June 24, 2013 then at $95.58, which set the stage for a solid uptrend.
FedEx began 2014 with an 11% correction from $144.39 on Jan. 2 to $128.17 on Feb.4. The price-gap higher on June 18 was fueled by better-than-expected earnings for the quarter ending in May. The pride-gap higher on Sept. 17 followed better-than-expected results for their quarter ending in August.
From a high at $165.17 on Oct. 6 to the low at $148.81 into Oct.15 the stock fell 9.9%. From this low to an all-time intraday high at $183.51 the momentum run-up totaled 23%. The stock is well above its 200-day SMA, now at $150.72.
Here's the weekly chart for FedEx.
Courtesy of MetaStock Xenith
The weekly chart for FedEx shows the stock has been above its 200-week simple moving average (green line) since December 2011 when this average was $78.60. Investors should be aware that the stock is 45% above its high set in March 2007, before the "Crash of 2008", and that the stock was as low as $34.02 in March 2009.
The weekly chart is positive but overbought with its key weekly moving average at $172.81 with its 200-week simple moving average now at $109.15. The momentum reading shown in red at the bottom of the graph is at 89.48, above the overbought threshold at 80.00.
Here's how to trade FedEx.
Investors looking to buy FedEx on weakness should enter a "good 'til canceled" limit order to buy weakness to a key technical level at $148.80.
Investors looking to book profits on FedEx should enter a "good 'til canceled" limit order to sell strength to a key technical level at $179.50, which is just below the all-time high at $183.51. Another exit strategy is to have a sell stop below the key weekly moving average at $172.81 remembering that this average will be rising each week.
TheStreet Ratings team rates FEDEX CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate FEDEX CORP (FDX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: FDX Ratings Report