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A Well-Packaged Short for FedEx Stock Bears Post-Earnings

FedEx is behaving like a bear off and on the price chart with no signs of recovering

A disastrous earnings parcel from FedEx (NASDAQ:FDX) is marked as a “return to shipper” reaction on the FedEx stock chart. Worse still, looking into 2020 the forecast off and on the price chart looks even gloomier. Let me explain.

A Well-Packaged Short for Fedex Stock Bears Post-Earnings
Source: Antonio Gravante /

On Tuesday evening, global shipping giant FedEx announced its second-quarter results. To some analysts the numbers were “breathtakingly bad.” To others like Real Money’s James Cramer, FedEx stock ranks as one of the biggest messes he’s ever encountered. And FDX stock investors lashed out accordingly. Shares tumbled 10% while finishing near session lows Wednesday.

By the numbers, FDX stock delivered earnings of $2.51 per share, which missed Street views of $2.76. On an unadjusted basis, profits also shrank by 40% from the last year’s second quarter. Similarly, revenues of $17.32 billion fell short of estimates of $17.58 billion and shrank from 2018’s sales of $17.8 billion. But that wasn’t the worst of it.

The primary driver behind the sell-off was FedEx stock’s second-straight and significant cut to its full-year outlook. The company now expects earnings of $10.25 to $11.50 per share. The revision is well below FDX’s prior guidance of $11 to $13 and now also beneath analyst forecasts of $12.03 per share.

FedEx management pointed fingers in multiple directions at the problems facing the company. Higher expenses and an increase in lower-margin residential deliveries versus business shipments is one challenge. Weakening global economic conditions were also blamed. And there’s the loss of business from “a large customer.” The unnamed but obvious party is retail, technology and logistics giant Amazon (NASDAQ:AMZN), which is now also a major competitive headache for FedEx stock.

FedEx Stock Price Weekly Chart

Source: Charts by TradingView

The other big threat facing FDX stock bulls is the price chart. A rough 2018 has continued throughout 2019 as shares have trended lower. The provided detailed weekly view shows FedEx stock’s series of lower-highs and lows.

The bearish action has formed due to the inability of FedEx shares to clear resistance while breaking key price supports. What’s more, following Wednesday’s pressure on shares conditions are pointing to a continuation of this trend.

FDX stock has put together a bearish engulfing candlestick to establish its latest lower-high pattern. With stochastics ominously backing lower prices, it’s only a matter of time until this year’s pattern low of $137.20 is challenged. It’s also unlikely to put up a fight. Unless an eyeballed $159 is reclaimed and compromises FedEx stock’s weakening trend, investors should work positions from the short side.

The first technical test worthy of bottoming will be the area from $114-$122. This support zone holds the 2016 cycle low and FedEx’s 62% retracement level tied to its 2009 bottom. And with $100 at the doorstep from that testing, today’s bearish investors can take delivery of FedEx stock and buy shares back for potentially a very handsome profit relative to risk.

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.

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