FedEx Stock Is on a Slippery Slope (FDX)

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Shares of freight and packages delivery company FedEx Corporation (NYSE:FDX) rose sharply in 2013 and 2014, but the price action since late 2014 has been very toppish in nature and looks to ultimately push FDX stock lower still.

beatthebell_185x185Active investors and traders could use the current confluence resistance area, coupled with the overall weak transportation sector, as a place to initiate short positions in FedEx shares.

It has been well documented that the transportation sector — as represented by the iShares Dow Jones Transportation ETF (NYSEARCA:IYT) — has underperformed the broader U.S. stock market year-to-date, which has Dow theorists screaming “bear market” at the top of their lungs.

It’s never so easy that we can draw high-probability conclusions from a single factor, but this “recent” negative divergence from transportation stocks versus the S&P 500 or the Dow Jones Industrial Average does look to have a good chance of being a leading indicator for a couple more volatile months ahead considering the slowing economic data.

IYT vs SPY chart
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The multiyear ascent in FDX stock, albeit steep, did come in an orderly fashion where rallies were followed by consolidation phases that ultimately led to the next legs higher.

When FDX stock rallied off the October 2014 dip sharply, the move came on lower momentum, and momentum ever since has further declined. The entire price action since early December 2014 has taken place in a well-defined range above an equally well defined area of support around the $165 line.

As we will see on the daily chart below, the June rally increasingly looks to have been an overshooting move that on the weekly chart also looks to have formed a double top, all of which is weighing on thinning support at the $165 mark.

FedEx FDX weekly chart
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On the daily chart below, we see that the March-June rally in FDX stock led to an overshooting move that marginally overcame the December 2014 highs but then equally quickly dropped lower, thus rejecting the higher highs and marking it as a breakout fake-out move. It is now very likely that the June top marked the highs of the trading range since last December, and that at least one more test of the $165 area will soon follow, which I suspect will break the stock lower.

Over the past few days, the transportation stocks bounced, leading FDX stock to bump into a confluence area of resistance made up of its 100- and 200-day simple moving averages (blue and red lines, respectively), which also coincides with a nearly 50% retracement of the June to July selloff.

FedEx FDX daily chart
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Active investors and traders could use the current area to lean against (i.e., initiate short positions) with a first price target near $165 and a second price target closer to $155. From a risk management perspective, if the stock rises above the $177.5o area, the position should be closed and only reconsidered upon the next bearish reversal day.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/fedex-corporation-fdx-stock-slippery-slopes/.

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