FedEx Corporation (FDX), the worldwide package delivery giant, has been in recovery mode since trading as low as $150.94 on Dec. 25. The stock closed Thursday, March 14, at $179.08, up 11% so far in 2019 and up 18.6% since the low. Even so, the stock is in bear market territory at 32.8% below its 2018 high of $266.67 set on June 12.
FedEx heads into earnings as a fundamentally cheap stock, with a P/E ratio of just 10.49, but it offers a dividend yield of just 1.45%, according to Macrotrends. The delivery company is set to report earnings after the closing bell on Tuesday, March 19, and analysts expect earnings per share of $3.10 to $3.16.
FedEx shares gapped lower on Sept. 18 on missed earnings and again on Dec. 19 as the stock fell to its Dec. 26 low. Some analysts on Wall Street expect this string of misses to continue. Cowen & Co. is positive on FedEx stock but lowered its price target. The firm maintains an Outperform on FedEx shares with a price target of $237, down from $242. My annual risky level is below that at $218.11.
The daily chart for FedEx
FedEx stock has been below a “death cross” since Aug. 8, when the 50-day simple moving average declined below the 200-day simple moving average, indicating that lower prices would follow. As this signal formed, investors had several opportunities to sell the stock at its 200-day simple moving average, when it was as high as $247.20 on Sept. 18 after that earnings miss. The “death cross” tracked the stock to its Dec. 26 low of $150.94. FedEx shares saw a “key reversal” day on Dec. 26 as the stock closed at $160.15, above the Dec. 24 high of $157.73.
The stock closed Dec. 31 at $161.33, which was an important input to my proprietary analytics. As a result, I show semiannual, annual and quarterly risky levels at $198.33, $218.11 and $240.07, respectively. The close of $181.00 on Feb. 28 was input to my analytics and resulted in a monthly risky level at $190.01. An important level to hold is the 50-day simple moving average at $176.90.
The weekly chart for FedEx
The weekly chart for FedEx is positive, with the stock above its five-week modified moving average of $179.13 and below its 200-week simple moving average, or “reversion to the mean,” at $194.37. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 50.26 this week, up from 41.33 on March 8.
Trading Strategy: Buy FedEx shares on weakness to the 50-day simple moving average at $176.91 and reduce holdings on strength to my monthly, semiannual and annual risky levels at $190.01, $198.33 and $218.11, respectively.
How to use my value levels and risky levels: My value levels and risky levels are based upon the past nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original quarterly, semiannual and annual levels remain in play. The weekly level is changed each week; the monthly level was changed at the end of January and February.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before the time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.