FedEx Corporation (FDX) shares rose 8% to a two-week high in Wednesday's session, while United Parcel Service, Inc. (UPS) stock added 6%, after Amazon.com, Inc. (AMZN) announced the June suspension of Amazon Shipping, the new service for non-retailer delivery. The e-commerce giant stated that demand for in-house delivery had surged due to the coronavirus pandemic and it needed to free up resources for its own customers. It's likely that adverse economic conditions contributed to the decision, with a looming recession likely to lower volumes for general shipping.
The upticks also had a beneficial impact on the iShares Dow Jones Transportation Average Index Fund ETF (IYT), which added more than 3% for the session. The fund has struggled along with broad benchmarks so far in 2020, dropping more than 28%. Despite the reprieve, the sector faces major headwinds in coming months because interstate and international transportation of goods is highly levered to economic expansion and contraction.
FedEx Long-Term Chart (2000 – 2020)
FedEx stock topped out above $120 in 2006 and sold off to $40 during the 2008 economic collapse. The subsequent recovery wave completed a round trip into the prior high in 2013, triggering an immediate breakout that attracted steady buying interest. The rally topped out in the $180s at the end of 2014, yielding a steep correction that relinquished about one-third of the stock's value, ahead of a powerful trend wave that broke out to new highs after the presidential election.
Price action posted a graceful series of higher highs and higher lows into January 2018's all-time high at $274.66. The stock has struggled since that time, initially caught in political crossfire between China and the Trump administration after the president threatened to impose tariffs. Amazon added to the misfortunes of FedEx in 2019 when it announced a competing delivery service that forced a cancellation of long-term contracts. The downtrend hit a three-year low in October 2019, while the pandemic added to losses, posting a seven-year low in March 2020.
The 2020 decline failed the 2013 breakout at $175 before bouncing at the .786 Fibonacci retracement level of the nine-year uptrend. It has been testing the failed breakout since that time, but the odds for continued upside look slim because the level has narrowly aligned with new resistance at the broken 200-month exponential moving average (EMA). Meanwhile, the monthly stochastic oscillator turned higher in February 2019, but choppy swings near the oversold level have failed to post a buying signal for the past 14 months.
UPS Long-Term Chart (2000 – 2020)
UPS has outperformed its rival in recent years, holding closer to bull market highs. A multi-year uptrend topped out at $89.11 in December 2004, giving way to a persistent downtrend that posted an all-time low at $37.99 in March 2009. Bulls took charge into the new decade, but it took more than four years to complete a round trip into the prior high. The stock broke out in the second half of 2013, entering a choppy uptick that stalled above $113 at year end.
Price action has carved a sloppy-looking pattern in the past five years, with at least five failed attempts to hold support at the $120 level. January 2018's all-time high at $135.53 marked the most successful effort, but that impulse failed in a high-volume downdraft less than two weeks later. A 2019 rally oscillated around resistance for more than four months before pulling back in a downtick that accelerated after the virus outbreak.
The monthly stochastic oscillator posted the most extreme oversold reading since 2007 last month, setting the stage for a bounce that has confirmed support at the 200-month EMA. The wild swings since 2017 have drawn the outline of a wide descending channel that could contain price movement for the rest of 2020. In the meantime, the current uptick could reach resistance at the 50-month EMA, which was broken decisively in February after a two-year test.
The Bottom Line
FedEx and UPS shares gained ground after Amazon pulled out of the third-party delivery business, but other major headwinds should limit gains in coming months.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.