Shares of transportation company FedEx Corporation (NYSE:FDX) rallied almost 14% last week on the back of an upbeat earnings report. However, while the January weakness in FDX arguably completed an important corrective phase, right now, FedEx stock looks over bought — and has rallied right into a thick layer of technical resistance.
When FedEx reported its latest quarterly results last Wednesday after the close of trading, the company beat on both the top and bottom lines. Specifically, third-quarter earnings came in at $2.51 per share versus estimates of $2.35, and sales of $12.7 billion beat the consensus mark of $12.4 billion.
During the conference call, FedEx also reiterated that online retailing giant Amazon.com, Inc. (NASDAQ:AMZN) will continue to be a good client going forward, which investors and traders were relieved to hear.
Before we look at the charts of FedEx stock there are two things to note for some perspective:
- After last week’s rally, the broader transportation sector now sits at the upper range of a strong layer of technical resistance. Remember that transports underperformed the broader stock market for a good part last year and acted as a leading indicator lower.
- While a break past technical resistance on the part of transportation stocks could be a leading indicator higher, investors should not lose sight of the fact that both economic and corporate top and bottom lines are still slowing after likely having peaked for the cycle last year.
FedEx Stock Charts
On the multiyear weekly chart, we see that after dropping 35% from its 2015 highs into the January lows, FDX stock successfully retested its 2013 breakout area. This is something that neither the broader transportation stock complex nor any of the major U.S. equity indices has yet to complete.
From this perspective, this could mean that if the broader market pulls back lower again in coming months or quarters and makes lower lows, FDX stock may only fall to a higher low versus its January lows.
On the daily chart, note that after last week’s nearly 14% pop, FedEx stock, although overcoming its red 200-day moving average, also has bumped into a significant horizontal layer of resistance. Also note how severely overbought the daily MACD oscillator is. The last time FDX was this overbought in the near-term, it was November 2013 and a swift 5% move lower followed. A 5% move lower from current levels would satisfy a pullback to the 200-day MA.
For now, active investors and traders could look to buy some cheap July at-the-money puts for a little consolidation lower in FedEx stock.
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