Shares of package delivery and logistic company FedEx Corp (FDX:xnys) have largely been in a consolidation phase since late 2014. While a big multi-year breakout move in FDX stock is not yet my call, on the nearer-term time frames it increasingly looks like a breakout rally that could measure 6% - 10% may be in the cards.
Transportation stocks as a group have been under-performing the S&P 500 since late 2014. I do not yet foresee a change of this theme but that does not mean that a stock like that of FedEx cannot try and play some relative catch-up for a while in the nearer-term.
On the multi-year weekly chart we see that the January sell-off in FDX stock retraced it marginally below its red 200 week simple moving average. This move from the 2015 highs down to the January 2016 lows measured about 35% and thus from a 'correction' standpoint was significant. After the initial surge in the spring time FDX stock also formed another higher low in late June, which now has the stock coiling up below diagonal resistance.
FedEx long term chart (click to enlarge)
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On the daily chart note that the late June lows corresponded to a 50% retracement in FDX stock, where it then once again bounced back up to diagonal resistance. The longer the stock coils tightly below diagonal resistance the better the odds of a more powerful breakout.
Management and risk description
The risk to this trade, as with any breakout trade is a breakout fake-out move. As such and considering that the month of August can be tricky, reduces position size on this trade would constitute sound risk management in my opinion.
Entry: Buy the stock or CFD upon a daily close above $164
Stop: daily close below $159
Time horizon: 4 - 6 weeks
— Edited by Clemens Bomsdorf
Non-independent investment research disclaimer applies. Read more