Editor’s note: Serge Berger, the head trader and investment strategist for The Steady Trader, will be providing the Trade of the Day until Sam Collins returns on June 27.
FedEx (NYSE: FDX) – The company announced earnings on June 22, reporting EPS of $1.76 compared with the consensus estimate of $1.72. But what really gave the stock a boost was that management upped its fiscal year 2012 guidance.
On the weekly chart, note that over the past eight and a half months, FDX has traded in a wide range between roughly $85 and $97. The $97 area has served as a major resistance level dating all the way back to early 2008. Given the most recent earnings announcement, FDX might be on its way back up to $97 and potentially beyond.
Zooming in on the daily chart reveals a few more details. Note the upside gap from the earnings announcement on June 22. After the early gap up, FDX closed the day with a doji candle, and yesterday, FDX continued its way higher on increasing volume.
The downtrend that has been in place since early May comes in just around the $92 area, which FDX managed to jump on a closing basis yesterday. This bullish action is likely to continue.
The trade: Open FDX long at $92.90 or better with a stop at $89. The initial target is $97 and the secondary target is $110. Given the gap up after earnings, this trade should be given enough time to work itself out.
