UPS (UPS) is trying to clear and hold its 200-day moving average, and the chart pattern is showing a possible breakout to $110-$115.
Chart courtesy of StockCharts.
Resistance for UPS is at $101 and the 200-day moving average. Tuesday’s high reached $100.47. Support is at $100-$99 and the 100- and 50-day moving averages. FedEx (FDX) is reporting earnings this morning, so shares of UPS could trade in tandem depending on the results.
With FedEx setting fresh 52-week highs, I’m hoping that Wall Street sees the disparity between the two stocks. UPS traded to a 52-week high of $114.40 in late January and is roughly 15% off its high. The stock also sports a yield of nearly 3% and recently paid a quarterly dividend of $0.73 in mid-May.
Fund managers looking for safety could start building positions in UPS at current levels to play a 10%-15% upside move over the next three to six months. Here’s how I’m trading it:
Buy the UPS October 110 calls (UPS151016C00110000) at current levels, which is around 58 cents.
My exit target for the UPS options is $1.40. I don’t have a stop loss in place at this time.
And looking at the broader market, today’s Fed meeting concerning interest rates could provide the spark for higher highs or lower lows. The party starts at 2 p.m. ET, so the action could get tight going into today’s announcement.
A head’s up, too, that I’m now out of the Rambus (RMBS) trade I put on last week. You should be able to get out today for about break-even as Rambus has been lagging and I want to be careful about time premium.
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