Fedex - Too Far, Too Fast?

As I was skimming through my watchlist today, I noticed one stock that I thought was worth writing about - Fedex (FDX). I've made a couple of good trades in the past being short FDX's major competitor UPS. As a result, and due to their vulnerability to high oil prices, I watch both these stocks regularly.

So how is FDX doing. Well, while we see oil falling and the S&P / Dow Jones rallying, it's normal to expect a large number of stocks to be retracing and testing their 20 and 50 day moving averages. However, not as many stocks which have fallen very heavily in recent weeks have found the bounce to have already brought them to their critical 200 day moving averages (at least not as far as my watch list is concerned). FDX however is there right now (it tagged the 200dma yesterday).

What does this mean for the stock moving forwards? Well, it's hard to say as there are multiple dependencies from the strength of the broader market to the price of oil and of course FDX's own performance. However, with oil having fallen heavily in the past month yet still trading at an expensive price of $110+ / barrel, it does leave heavily rallying (and cheap oil dependent) stocks like FDX quite at risk to any bounce in oil. The last time FDX retraced from a recent low to its 200 day moving average was in late May when the stock was just beginning its downturn. Within 5 weeks after that point FDX had fallen over 25%. The following chart shows how that action took place

FDX YTD - Daily

Here we can see that in late May the stock failed a test of both the 200 dma and an important trendline that had formed and rapidly plunged to what was a price low that hadn't been seen since 2004. Since that mid June low point, the stock has rapidly during the broader market rally and as oil has fallen from its own historical highs and we're back at the 200 dma. Not only that, but the trendline which proved so critical in the past is also intersecting that point. What happens from here will be very interesting to watch.

To wrap up on this brief analysis, here's the weekly chart dating back to 2004.

FDX 5 year - weekly

The main thing I wanted to show here was that crucial tredline that divides the chart in two at around 100. I'd be surrpised to see FDX make it that far but if it does, it's sure to face extremely stiff resisance and would take a huge concerted effort from the bulls to break past it (or an even more dramatic fall off in oil!).

I'll post back again in a couple of weeks as I think this will be a fascinating stock to watch.