Shares of global shipping giant FedEx (NASDAQ:FDX) are knocking on the door of the bears. And for traders who respect investing can be a two-way street, it’s time to consider a well-placed short position in FDX stock and one of the broader market’s more enduring bellwethers. Let me explain.
It’s official. Last Thursday, FedEx stock entered bear territory, as shares shed in excess of 20% from its late January peak and all-time-high of $272.65. And as a closely watched barometer of economic activity, the bearishly divergent price action demands being monitored — and possibly demands our dollars with a bearish short entry into shares.
As most investors and consumers are aware, as economic activity picks up steam and the demand for shipping packages grows, FedEx is there on the scene with its worldwide network of planes and white panel trucks.
Also and not exactly a secret, the ballooning trend in e-commerce led by the likes of Amazon.com (NASDAQ:AMZN) has made FDX stock even more important as a key indicator in today’s economy. And right now there are serious warnings occurring off and on the FDX stock chart.
Last month, FDX stock missed Street estimates blaming trade tariffs and investments in employee wages for the weak report. Regardless, investors collectively didn’t take kindly to the results and sent shares of FedEx skidding by about 5.5%. And matters on the price chart have only become more serious.
FDX Stock Weekly Chart
On the FDX price chart, last month’s immediate earnings reaction parlayed itself into a big technical win for bears. What had been a healthy, albeit slightly irregular corrective “W” shaped base of around eight months in duration quickly turned into a confirmed descending triple top formation. The provided weekly view reflects those observations.
In the past month, FedEx stock has proceeded to move aggressively lower, below the second pivot of the W pattern and establish a lower low channel line. The same price action, as noted above, has also triggered a classic bear market signal for shares.
I’m personally not a fan of bear market signals and generally look for compelling buy situations as a name like FDX comes under pressure. But in this instance optimism appears misplaced. Bottom line, the surly and confirmed topping pattern in FedEx shares and one sporting a similarly sympathetic stochastics pattern after a historic bull market of nearly ten years looks ominously like a canary in the coalmine.
For like-minded investors willing to take on bearish short positions, fading any rallies in FDX stock below $236 and preferably as a reversal candlestick pattern emerges is one preferred approach.
Taking this route, a sensible exit would be to set a stop-loss above the mid-channel line. This is where FedEx shares should find resistance if our thesis is correct. Otherwise, it’s our view investors are risking significantly larger losses in a much-less-compelling technical picture for bears.
And should shares cooperate, taking delivery of FDX by locking in initial profits between the 50%-62% retracement area is appreciated as smart business as a key support zone comes into play.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
