FedEx (NYSE:FDX) shares a near duopoly on the shipping business with UPS (NYSE:UPS). But like every aspect of life, that can be good news in good times and bad news in bad times. And right now it is bad times. At least from FedEx's perspective.
Headquartered in Memphis Tennessee, FedEx owns one of the largest fleets of airplanes in the world. All flying in and out of the Memphis hub. They also have a large ground shipping business. Crude oil prices are down and that is a good thing for the company, but with shipping down they are just not making the grade.
The chart below shows the rise from the start of 2014 to a top at 184 in early December it plateaued for nearly nine months, making a double top, and then pulling back with the market. After a few weeks of consolidation following the major drop it closed last week below the range and towards new lows. That spike nearly fully retraced the move higher
The RSI is also turning back lower after failing to even cross 50 with the MACD turning back toward a bearish cross down, never having turned positive. The one positive, or should I say, not so negative, is that it is at the lower Bollinger Band®. A measured move would target a drop to 128 on a break lower.
But support lower at 145 is followed by a gap to fill below from June 2014 to 140.48. Support lower comes at 138.75 and 137.25 before 133.50 and 131.70 followed by 128.34. Resistance above stands at 148 and 154.80 followed by 156 and 160. Short interest is low at 1.6% and the company is expected to report earnings next on December 16th.
Looking at the options chains reveals that FedEx has weekly options out to October 30th, then November and January 2016. This week sees open interest highest on the put side nearby at 144 with a cluster from 150 to 165 and higher on the call side. October monthly options have big open interest above starting at 155. January 2016 options, the only ones past the earnings report, are biggest at 145 on the call side and then 160 and 170 on the put side.
Trade Idea 1: Sell the stock short on a move under 145, with a stop at 149.
A straight short sell with a stop at the prior consolidation.
Trade Idea 2: Buy the September 145 puts (offered at $1.93 late Friday).
A defined risk way to participate in the downside.
Trade Idea 3: Buy the October 145/130 put spread ($3.48).
Caps the return but for lower cost for a longer term trade, with better than 4:1 reward to risk ratio.
Trade Idea 4: Buy the October 145/135/130 broken wing butterfly put ($2.60).
Low cost participation for a $10 move and makes money anywhere below 142.40.
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad market macro picture reviewed Friday which, heading into the last week of summer and out of expiration week sees the equity markets looking weak again.
Elsewhere, look for gold to continue the bounce in its downtrend while crude oil slows consolidates with a short term bias lower. The US Dollar Index looks better to the downside in consolidation while US Treasuries may reverse higher in the downtrend. The Shanghai Composite looks to continue consolidation in the downtrend and Emerging Markets are biased to the downside after their bounce.
Volatility looks to remain above normal levels in its drift down with a chance of a renewed push higher. This would keep the bias flat to lower for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts agree with a downward bias although all are in consolidation ranges; no man’s land. Use this information as you prepare for the coming week and trad’em well.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.