FedEx stock analysis: is a bounce likely?
Charts suggest that FedEx is close to strong support. Will it rebound?
FedEx recently reported financial first-quarter revenues of $22bn (£16.12) and earnings of $1.11bn, or $4.09 per share. In the comparable quarter of the previous year, the company had reported revenues of $19.3bn and earnings of $1.25bn, or $4.72 per share. MarketWatch reported the FactSet consensus estimate to be $21.93bn for sales and $4.88 per share for earnings
FedEx said earnings were lower than expected because higher wages and increased transportation costs had pushed expenditure $450 million higher year-on-year.
According to the company, the conditions in the first quarter “were more challenging than anticipated and are now expected to extend longer.”
According to Bloomberg, Matt Arnold, an analyst with financial service firm Edward Jones, concurs: “The labour availability challenges are likely to continue to pressure profitability over the next several quarters as the COVID-19 pandemic continues to impact the labour market.”
FedEx expects its full-year earnings per share, excluding certain accounting adjustments and business realignment costs, to be between $19.75 to $21.00. This is compared to its previous projection of $20.50 to $21.50.
The consensus analyst price target for FedEx, according to Yahoo Finance, is $343.38. Could FedEx stock go up and hit its expected target price or will weak guidance hurt its prospects? What do the charts suggest? Read our FDX stock analysis to find out.
FedEx share price technical analysis: weekly chart
After rallying from the March 2020 low of $88.62 to a high of $319.12 in May of this year, FedEx’s stock price has entered a corrective phase. The price has dipped to the strong support level at $234.55.
The moving averages have completed a bearish crossover and the relative strength index (RSI) has dropped close to the oversold zone, indicating that sellers are in command.
If the bears pull the price below $234.55, the selling could intensify further and the stock could plummet to the 50% Fibonacci retracement level at $204.05.
Alternatively, if the price rebounds off the current level, the stock may attempt a relief rally, which could hit a barrier at the 20-week exponential moving average (EMA). If the price turns down from this resistance, the possibility of a break below $234.55 increases.
This negative view will be invalidated, however, if the bulls push and succeed in sustaining the price above the 20-week EMA. The stock could then retest the stiff resistance mark at $319.12.
FedEx share price technical analysis: daily chart
FedEx’s stock price has consolidated between $234.55 and $305 over the past few months. Although the bulls pushed the price above that range on 5 May, they were unable to build on the breakout.
The failure to sustain the upwards move perhaps attracted profit-booking from short-term traders, resulting in a break below $305 on 3 June. Thereafter, repeated attempts by the bulls to thrust the price above the resistance mark were thwarted by the bears.
The selling intensified when the stock plunged below its $281.72 support on 27 July. Since then, the stock has been in a steady decline.
Although the downsloping moving averages indicate an advantage to the bears, the deeply oversold levels on the RSI suggest that the selling has been overdone in the short term.
If the stock rebounds off the current level, the relief rally may reach the 20-day EMA, which could act as a strong check. If the bulls successfully hold the $234.55 level during the next dip, the stock may start a gradual upwards move towards $280 and then $305.
FedEx: stock buy or sell at these levels?
FedEx’s share price analysis shows that the stock has dropped to a strong support level and the RSI indicates that it is extremely oversold. This increases the likelihood of a relief rally from the support level. If the bulls drive the price above the 20-day EMA, the stock may extend its consolidation for a few more days.
The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should always do your own research or contact your financial adviser before arriving at a decision. Never invest more than you can afford to lose.