When it comes to U.S. stocks, there’s good news and bad news. The bad news is that the market-wide losing streak extended to three sessions in trading Tuesday. The good news is that investors stepped into the decline, with broad indices closing well off early-session lows.
Long-running concerns about U.S. manufacturing and the trade war remain the likely culprits. It’s also possible there’s some profit-taking after an impressive rally from last December’s lows.
Whatever the cause, the market suddenly feels shaky. That’s the case as well for Wednesday’s three big stock charts.
All three stocks have intriguing fundamental cases — but all three need support to hold for a near-term rally. It might take some broader optimism for that to happen.
The pressure continues on FedEx (NYSE:FDX). FDX stock touched a three-year low in early October, and a bounce from those levels is starting to reverse. As a result, the first of Wednesday’s big stock charts shows a stock in a precarious position:
- Support around $150 had held twice before before breaking in September after disappointing fiscal first-quarter earnings. Buyers have stepped into dips in the past few weeks, but they will have to do so again. Tuesday’s decline pushed FDX stock through its near-term moving averages. Further declines suggest shares could retest the lower support line of its downtrend, all the way down near $130.
Looking at the weekly chart, the news doesn’t look notably better. FDX stock has dropped over 40% from 2018 highs. There’s a steady, bearish, and still-unbroken pattern of lower highs and lower lows. $130 admittedly seems far too cheap for FedEx stock from a fundamental perspective, but it actually would fit well trading since the beginning of last year.
- Fundamentally, FDX stock does cheap, and it’s an intriguing option for investors bullish on the economy. As Luke Lango detailed on this site, there are competitive concerns, notably relative to Amazon (NASDAQ:AMZN), a former FedEx customer. But a strong economy usually drives strong earnings for FedEx, and the company plans to pivot to other growing e-commerce providers.
- That macro reliance, however, adds to the sense that FDX stock has to hold support here. If the stock can’t rally in a still-bullish environment, there’s a very real question as to when it can rally. And if cyclical worries about the broader economy are added to existing secular concerns about FedEx itself, that support simply may not hold.
Molson Coors (TAP)
The story is similar at Molson Coors (NYSE:TAP). The decline in TAP stock began in early 2016; shares have declined over 55% from their peak. TAP stock is cheap, and as the second of our big stock charts shows, it also needs support to hold:
- Support held at $50 in August, and shares are re-testing those levels after a potential bullish reversal out of a broadening descending wedge failed. With shares still below moving averages, which have mostly acted as resistance for most of this year, there’s no technical reason to see buyers stepping in just yet. As a result, there’s a path to new six-year lows.
- TAP stock is cheap, at 12x 2020 consensus earnings per share. But analysts see earnings declining next year, as they have so far in 2019. And a recent restructuring suggests the company itself doesn’t see beer weakness reversing. Molson Coors is changing its name from “Molson Coors Brewing” to “Molson Coors Beverages.” It’s laying off employees and looking toward sparkling water and a partnership with cannabis play Hexo (NYSE:HEXO) for growth.
- The problem is that Hexo is scuffling, and in hard seltzer Molson Coors is well behind White Claw from privately held Mark Anthony Brands and Boston Beer (NYSE:SAM) brand Truly. Anheuser-Busch (NYSE:BUD) is targeting the space as well. At the very least, Molson Coors has its work cut out for it. It’s possible the dividend could provide support — TAP stock currently yields 4.55% — but that aside, Molson Coors needs some help from either its industry or the broader market.
The last of Wednesday’s big stock charts, eBay (NASDAQ:EBAY), echoes the first two. EBAY stock hasn’t had quite the long-term weakness of either TAP or FDX, but shares have fallen roughly 25% since the beginning of 2018. Near-term trading has been problematic, leaving the stock at a key support point:
- Shares sit below all three moving averages, and below support that held in the spring. Shares gapped up last month when the company sold its StubHub business for $4 billion, but the gap was quickly filled. Technically and fundamentally, this looks like a stock without a catalyst until fourth-quarter earnings in late January.
- EBAY stock is cheap, at 12.6x the midpoint of 2019 earnings guidance given with the third-quarter report. (That figure includes the expected contribution from StubHub.) But as Josh Enomoto pointed out last month, gross merchandise volume (GMV) has been heading in the wrong direction. Earnings have held up, but largely due to share buybacks. At the moment, this looks like a stagnant business priced as such.
- That said, all hope is not lost. eBay’s legacy business still throws off substantial cash. A new CEO should arrive shortly. There likely are ways to better monetize the company’s enormous user base in an e-commerce market still showing impressive growth. EBAY stock is out of favor at the moment, but if support can hold, it could be an attractive pick for investors looking for value in the tech space.
As of this writing, Vince Martin has no positions in any securities mentioned.