The holidays are fast approaching, and countless packages will soon be delivered to good little boys and girls around the world. But if Christmas is going to arrive for FedEx Corporation (NYSE:FDX) shareholders, then buyers need to step up, pronto. The courier delivery services company is on the verge of breaking pivotal support, which will weaken its chances of cobbling together a respectable year-end run.
Focusing on transportation stocks like FDX and United Parcel Service, Inc. (NYSE:UPS) for the holidays makes sense. But whether it makes dollars and cents depends on if their price trends remain bullish.
Like virtually every other stock on the planet, FedEx has enjoyed a banner year. At $221, the stock is up 19% year-to-date. Its recent touch of $231.35 marked a new record high, so there’s no doubt buyers have dominated for months now. But profit-taking finally took its toll last week, and the stock has since retreated $10 to the 50-day moving average.
The $220 level is also significant because it is an old resistance level that has been tested multiple times since. If price has memory, then there have certainly been some memorable moments for participants in this area.
On the bright side, the ongoing pullback is providing a superior spot for those seeking a low-risk entry point to deploy bullish trades for FDX going into year-end. Buying the stock near support after a $10 dip is obviously more attractive than chasing after a rally to record heights. But the question of whether buyers will step up remains.
But, really, all we need to do is wait for confirmation. Then we’ll deploy a bull play.
FedEx Profits in Time for Christmas
If FDX rallies above yesterday’s high ($222.84), then consider buying a bull call spread. To provide ample time for the rally, let’s use January options. Buy the Jan $220/$230 bull call spread for around $4.80. Your risk is capped at the initial cost and the reward is $5.20.
That means you can more than double your dough if FedEx rises above $230 by expiration. Though, if you want to ring the register before Christmas, then do so.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out Tyler’s trading blog, Tales of a Technician.