Options looks relatively cheap on the shipping name
Shipping giant FedEx Corporation (NYSE:FDX) is moving higher this afternoon, up 1% at $159.72. This positive price action may be short lived, however, as data from Schaeffer's Senior Quantitative Analyst Rocky White indicates FDX is nearing a historically bearish trendline.
On the charts, FedEx stock has been in a major downtrend since early 2018. Since hitting its all-time peak of $274.66 in January of that year, the equity has shed 42%. In fact, earlier this month the UPS (UPS) rival touched a three-year low of $137.78.
Ushering the stock lower has been its 120-day moving average, and FDX is now back near this this trendline. Per White, there have been four other times during the past three years FDX tested resistance at its 120-day, and was lower one month later 100% of the time, with an average loss of 14.9%. Another drop of this magnitude would put the shares back near multi-year lows by December.
Plus, short-term options premiums on FedEx stock look relatively cheap, based on its Schaeffer’s Volatility Index (SVI) of 22%, which ranks in the low 8th percentile of its annual range. This is around its two-year average, and if this indicator holds steady near here over the next two weeks, White's modeling shows that an at-the-money FDX put option could potentially return 429% on another expected retreat from its 120-day moving average.
Meanwhile, short sellers have been ramping up their exposure to FDX stock, with these bearish bets up 31% in the two most recent reporting periods. This accounts for just under 3% of the stock's total available float, meaning the bearish bandwagon is far from full. Continued short selling could create bigger headwinds for FedEx stock.