Historic Bear Signal Could Cap FedEx Stock's Recent Rally

The stock is getting a halo lift today on UPS' recent earnings win

Deputy Editor
Jul 24, 2019 at 2:28 PM
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With sector peer United Parcel Service (UPS) in the spotlight, FedEx Corporation (NYSE:FDX) is getting a halo lift, up 2.3% at $177.77. The jump has FDX pacing for its fifth straight win, extending the stock's impressive rally off its June lows. In fact, only one of the last 10 closes have been negative, and the stock is eyeing its biggest weekly gain this year. Traders may want to proceed with caution before betting on this rebound, though. In its bid at a rally the stock has run up to its 160-day moving average, which has historically been bad news for the delivery name. 

FDX Chart July 24

FedEx has come within one standard deviation of this trendline three other times in the past couple of years, according to data from our Senior Quantitative Analyst Rocky White. Only 33% of one-month returns on these signals have been positive, and the stock has moved down 7.75% on average. At the security's current perch, a similar move would knock FDX back down to the $163 area. 

Analysts are fairly split on the stock, with 10 calling it a "buy" or better and seven giving it a "hold" or worse rating. Plus, FDX's consensus 12-month target price of $187.84 is at a slim 6.6% discount to current levels. Should FDX reverse course, a round of analysts' downgrades could put additional headwinds on the charts. 

Echoing this, an unwinding of optimism on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) could put pressure on FedEx, too. In the last 10 days, three calls have been bought for every put. This ratio sits in the 98th percentile of its annual range, hinting at a much healthier appetite for bullish bets of late.

Should traders want to speculate on FDX's next leg down, options might be an attractive choice. The security's Schaeffer's Volatility Index of 24% is in the 18th percentile of its annual range. This suggest that near-term options traders are pricing in relatively low volatility expectations. 

 

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