FedEx Corporation (FDX) reports earnings next week, with Wall Street analysts expecting profits of $3.18 per share on $17.1 billion in fiscal first quarter revenue. The transportation giant rallied more than 2% despite reducing guidance in June’s fourth quarter report but has traded sideways in the past three months, failing to shake off anxiety generated by trade wars and Amazon.com, Inc.’s (AMZN) self- delivery initiative.
Even so, it looks like a 2019 triple bottom reversal is now in place, providing a bullish platform for a recovery wave that will run into a buzzsaw of resistance at and above $200. Gains above that level may have to wait for 2020 or beyond because the company’s international growth has been pressured by strained business dealings with China. This is especially because the Asian nation has mentioned FedEx as a potential retaliation target.
FDX Long-Term Chart (1990 – 2019)
A multi-year downtrend ended at a split-adjusted $7.38 in 1991, giving way to a historic trend advance that carved one minor correction into the May 1999 high at $61.88. The stock held up relatively well during the 2000 to 2002 bear market, dropping into support in the mid-$30s, and testing that level successfully after the Sept. 11 attacks in 2001. Price action completed a cup and handle breakout pattern in June 2003, setting the stage for a mid-decade uptrend.
The stock posted strong gains into the 2006 high at $120 and eased into a narrow sideways pattern that broke to the downside in the third quarter of 2007. The subsequent decline unfolded in multiple waves that accelerated into a selling climax that found support just four points above the 2000 low in the first quarter of 2009. The subsequent bounce carved two buying waves, completing a 100% retracement into the prior high in 2013.
The rally into 2015 ended at $185, giving way to a downturn that offered a low-risk buying opportunity at the 2013 breakout level in early 2016. The subsequent uptick gathered strength after the presidential election, generating impressive returns into January 2018’s all-time high at $274.66. The stock fell off a cliff nine months later, spiraling lower in a vertical decline that booked an 84-point loss in December.
Price action has been carving a basing pattern through 2019, with successful tests at the 2018 low in May and August raising the odds for a sustained bottom. The monthly stochastics oscillator is mimicking this bullish pattern, posting a double bottom before entering a new buy cycle in August. This bodes well for continued gains through year end, but that doesn’t rule out whipsaws triggered by trade developments.
FDX Short-Term Chart (2016 – 2019)
A Fibonacci grid stretched across the 2016 into 2018 uptrend places the December low at the .786 retracement, which marks a high-odds turning point after a decline. Two tests at that level have established strong support above $150, which should provide a trading floor for months and possibly years. Even so, extensive technical damage will take time to overcome, warning market players to expect incremental gains rather than a quick trip into last year’s bull market high.
The bounce since August has reached resistance at the 200-day exponential moving average (EMA) and the .618 retracement level. This alignment raises the odds for a sell-the-news reaction after next week’s earnings report, but a decline into the $150s isn’t likely. As a result, a pullback that reaches the 50-day EMA at $162 could offer a low-risk buying opportunity, ahead of a stronger buying impulse that tests $200 and the April high.
The Bottom Line
FedEx stock has bottomed out, but it’s wise to expect two-sided price action in the coming months rather than a quick rally back to 2018’s all-time high.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.