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FedEx (NYSE: FDX) has been the beneficiary of falling gas prices for the past year and a half now, and those falling fuel costs may have helped move FedEx’s stock price from the $150 range in June 2014 to almost $185 this past June. Unfortunately, the stock price peaked in June and has been falling since that peak.
A look at the daily chart shows a downward-sloped trend line that connects the high from June with the high from early August and now the high last week. The way the stock hit this trend line and then reversed course suggests that the downward slide in FedEx stock will resume.
Looking at the oscillators on the daily chart, we see that the slow stochastic readings had reached overbought levels and made a bearish crossover yesterday. This bearish crossover matches the crossovers seen in August and June, the other two points on the trend line.
When the stochastic lines crossed in June, the stock dropped almost 10% in the next month. When they crossed in August, the stock dropped over 15% in just a few weeks. These numbers would suggest that a return to the $140 range may be in order for FedEx stock in the coming weeks.
Turning our attention to the weekly chart, we see that the stock fell below its 52-week moving average in July and then fell below its 104-week moving average in August. Now the 13-week and the 104-week moving averages are acting as resistance.
While the stock has been below the two longer-term moving averages in the last couple of years, the price has stayed below the 104-week long enough that it looks as if the 13-week moving average will make a bearish crossover of the 104-week. This hasn’t happened since late 2011, and when it did happen, the stock fell another 20% before it rebounded.
While you would have thought that lower fuel costs would have benefited FedEx, the company has missed on three of its last four earnings reports. Yes, the company’s earnings have grown, but they came up short of analyst estimates three times. While it is earnings season, FedEx is one of those companies on an odd earnings cycle and won’t report again until December, so you won’t have to worry about its next report for a while.
The sentiment toward FedEx stock shows a slight bullish skew with a short interest ratio of 1.57, which is pretty low. As for analysts, there are 17 “buy” ratings, 11 “hold” ratings and no “sell” ratings.
Based on the developments on the two charts, I see FedEx stock falling over the coming weeks. And based on the previous stochastic crossovers, I see it falling at least 10%, which would put the stock back down in the $140 range.
If the stock breaks below that level, the next layer of support is at $130. As for a stop-loss point, I think if the stock moves back up to the $160 level it would mean the downtrend has been broken and I would close any bearish trades at that time.
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