Shares of United Parcel Service (UPS) have underperformed those of competitor FedEx (FDX) by 18% over the past year, but that dynamic may be about to change over the short term, presenting a profitable trading opportunity.
UPS is breaking out of a channel pattern that projects an initial 6% move higher and which would fill an open gap going back to January of this year. FedEx shares broke above channel resistance of their own at the beginning of the month and now it looks like it's time for UPS shares to catch up.
The horizontal consolidation pattern on the UPS daily chart is defined by resistance in the $108.50 area and support in the $102.00 area. The top end of the channel is currently intersecting with the 200-day moving average and a downtrend line drawn off the December and January highs. The multiple layers of resistance add validity to the breakout. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has have been tracking higher on both time frames and above their respective center lines. The relative strength index crossed above both its centerline and 21-period moving average last month, and these individual indicators reflect improving price momentum and short-term trend direction. Chaikin money flow moved into positive territory before the recent May low was made and, along with the accumulation/distribution line has continued to track higher suggesting increasing buying interest.
The large January gap leaves an overhead resistance vacuum with little in the way, from a technical perspective, to prevent it from being filled. UPS is a long candidate at its current level using a trailing percentage stop, with the $115.00 area the initial target objective.
UPS was up 0.8% to $109.86 by Tuesday close, and FedEx was up 0.1% to $209.39.