FedEx Corporation (FDX) has settled at 18-month support after a volatile decline dumped the packaging giant into a test of the deep February low. The latest selling wave began on March 21 in a bearish reaction to a blowout quarter that beat expectations by a wide margin. Price action in coming weeks may decide the stock's long-term fate, with a bounce at support signaling an advance to new highs while a breakdown could quickly shed another 50 to 60 points.
Historically, packaging stocks have showed great sensitivity to economic turns, often changing course well in advance of monthly data. With this in mind, a trade war might undermine the company's long-term uptrend in two ways. First, tariffs could impede supply chains within affected countries, lowering packaging volumes. Second, those policies could also affect U.S. economic growth, opening the door to a new recessionary cycle. (See also: 6 Stocks At High Risk in a Trade War.)
FDX Long-Term Chart (1996 – 2018)
The stock broke out above 10-year resistance in the upper teens and $20s in 1996 and entered a strong trend advance that posted two stock splits into the 1999 top at $61.88. A pullback into the new millennium found support in the low $30s, with that level surviving multiple tests through the Sept. 11 attacks in 2001. It then turned sharply higher, completing a round trip into the prior decade's high in the second quarter of 2002.
A 2003 breakout attracted strong momentum buying interest, lifting price in a graceful uptrend that continued into 2006, when the rally stalled above $120 and eased into a narrow trading range. Range support broke at the start of 2008, triggering a downtrend that escalated into a full-scale rout during the economic collapse. Selling pressure finally ended in March 2009 after the stock posted a seven-year low in the low $30s.
The subsequent bounce reached the 2006 high in the fourth quarter of 2013, yielding a breakout and uptrend that ended around $180 in 2014. It cleared that resistance level two years later, easing into a rising channel that continued into January 2018's all-time high at $274.66. Aggressive sellers have controlled price action since that time, carving a bearish descending triangle on top of the 200-day and 50-week exponential moving averages (EMAs).
FDX Short-Term Chart (2016 – 2018)
The decline into February 2018 ended at the 200-day EMA near $230. The stock bounced into March, reversing above $250 and dropping back to the moving average, where it's been grinding sideways for the past two weeks. This price action could signal the final high in a descending triangle pattern that has the power to generate a 50-point breakdown. A Fibonacci grid stretched across the 2016 into 2018 rally wave places the .382 retracement level at $215, marking an initial downside target if bulls fail to defend support.
On-balance volume (OBV) stalled in 2014 at the 2006 high and broke out above that level in December 2017. It has held up well since that time despite recent downdrafts, indicating strong institutional support. In turn, this resilience raises the odds that buyers will prevail at support, despite the bearish pattern now in place. Even so, no buying signals have rung yet, telling informed market players to keep their powder dry, whether they're targeting the long or short side.
Pay close attention to the Feb. 9 low at $226 if the stock trades through $231 because that marks the last support level, ahead of a breakdown that could relinquish 10 points in a single session. Conversely, it will now take a rally above $243 to improve the technical tone, with bulls taking full control if they can lift the stock above the February and March peaks between $255 and $260. (For more, see: FedEx Delivers Earnings Below Its Quarterly Pivot.)
The Bottom Line
FedEx has dropped into deep support that could attract a strong recovery wave. However, time is running out after two failed bounces, opening the door to a potential breakdown that could mark the end of the long-term uptrend. (For additional reading, check out: UPS vs. FedEx: Comparing Business Models and Strategies.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>