Shares of FedEx Corporation (NYSE:FDX), while still higher by around 10% for the year, have seen a one-way street slide since the first half of July. FDX stock currently sits about 6% off its year-to-date highs and looks to offer lower levels still.
As a reminder, we currently find ourselves in a choppy August stock market period, which is to say that from a trading perspective, less is more as it helps preserve previous capital and prevent psychological damage. Markets tend to become more ‘interesting’ again as we move into September and October.
So you know, the transportation stocks as a group and to which FDX belongs as represented by the iShares Dow Jones Transport. Avg. (ETF) (BATS:IYT) last week broke below their 200-day simple moving average for the first time since June 2016. While with a single-day rally, this could quickly be overcome again, all else being equal this does now favor the path of least resistance to the downside.
In fact, FDX stock with about 13.6% is the IYT ETF’s largest component.
FDX Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Looking at the multiyear chart of FDX stock above, we see that all the intermediate- and longer-term moving averages are still clearly pointing higher, and no trend lines have been violated either.
In other words, any concerns the bulls should have in FDX stock are best to be focused around the near-term time frames for now, although it is worth noting that momentum oscillators such as the MACD at the bottom of the chart did post a lower high in July while price rallied to a higher high — thus flashing negative divergence, a bearish indication.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Looking at the closer-up daily chart, we see that FDX stock in June staged a nice breakout rally out of a six-month consolidation period marked by the blue box. My proprietary B2 Reversal Indicator has been printing sell signals on the chart of FDX stock for the better part of the past month and a half (i.e. since first half July) — note the three red down arrows.
Considering the negative divergence between momentum and price on the multiyear chart above, it does look likely that FDX will have further to slide, with an initial downside target in the low-to-mid $190’s. This would also get the stock firmly back into the blue box. Any strong one- or two-day reversal would be a stop loss signal.
Check out Serge’s Daily Market Outlook for Aug. 21.
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