FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) are falling in early morning trading on news that the famed retail squasher, Amazon.com, Inc. (NASDAQ:AMZN), is testing out its own delivery service. Is the future of FDX and UPS now in doubt? And, perhaps more importantly, is today’s gap lower in the pair a buying opportunity or a signal to abandon ship?
I have few opinions on the former question, but many on the latter. FedEx stock remains a buy and here’s why – its price chart remains a beauty.
Adherents to technical analysis can’t help but view FDX with bullish optimism – despite this morning’s scare – for the simple fact that it remains in an uptrend across all major time frames.
Rather than speculating on the long-term ramifications of Amazon.com’s potential entrance into delivery, let the chart be your guide. And until the fears that FedEx is about to get its lunch eaten by the biggest kid in school manifest themselves in the price action, don’t worry about it.
What do FedEx Stock Charts Say?
In case it wasn’t obvious, today’s mild down-gap, which has now shrunk to a mere -0.6%, doesn’t exactly scream abandon ship. Not yet at least. Let’s start with the big picture. FDX remains entrenched in an uptrend on its weekly chart. With rising 20-week, 50-week, and 200-week moving averages we know that buyers have dominated for a long time now. And, the stock tagged a new record high at $227 just this week.
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To become concerned with the weekly trend we would need to see a break below the $203 support level at a minimum. Until then, don’t sweat the Amazon news. For more detail, we turn to the daily chart.
Since Monday’s record touch, FDX has suffered a three-day pullback amid mild profit-taking. Both the magnitude of selling and the amount of volume seen isn’t exactly a harbinger of doom. Bulls should take heart from this morning’s reaction.
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Instead of the down-gap being sold aggressively, it’s been bought. Indeed, dip buyers have passed today’s test of their resolve. In other words, the news did not temper their enthusiasm for putting money to work.
The Amazon-Hasn’t-Killed-FedEx-Yet Trade
If you’re willing to bet FedEx shares will stay aloft over the coming month, then sell the Nov $210/$200 bull put spread for $1.20. Provided the stock sits above $210 at expiration you will capture the max reward of $1.20. The cost and max risk of the spread is $8.80. To minimize the damage, however, you can exit if FedEx falls below the short strike at $210.
As of this writing, Tyler Craig didn’t hold any positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
