United Parcel Service, Inc. (UPS) is a global leader in package delivery, which benefited from a surge in online holiday sales. The company enjoyed a solid holiday season and needed 95,000 seasonal employees to get the job done. The company beat on earnings for the fourth quarter, but the stock slumped on unexpected special situations.
The company was forced to spend $125 million to catch up on delivery backlogs. UPS also announced larger-than-expected plans to add to its fleet of Boeing 737 and 787 airliners. In addition, the company plans to spend $7 billion to build and repair its infrastructure.
The stock closed Wednesday at $127.32, up 6.9% year to date and in bull market territory at 24.7% above its 52-week low of $102.12 set on May 18, 2017. The stock set its all-time intraday high of $135.53 on Jan. 18, 2018, and is currently trading 6.1% below this high. The stock opened Thursday at $119.03, down 6.5%. (See also: Shipping Snags Curb UPS Profit Growth in Fourth Quarter.)
The daily chart for UPS
The daily chart for UPS shows that the stock has been above a "golden cross" since Aug. 7, 2017, when it closed at $111.89. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. The horizontal lines show that UPS could not hold my quarterly pivot of $128.99 going into the earnings report, which served as a sure warning. There is now a monthly risky level of $131.39, and my semiannual value level is $112.30.
The weekly chart for UPS
The weekly chart for UPS will be downgraded to negative if the stock price closes this week below its five-week modified moving average of $124.85. The stock is well above its 200-week simple moving average at $105.89 and has been above this "reversion to the mean" since the week of Feb. 5, 2016, when the average was $92.49. The 12 x 3 x 3 weekly slow stochastic reading is projected to end the week at 76.90, declining below the overbought threshold of 80.00.
Given these charts and analysis, my strategy is to buy UPS shares on weakness to my semiannual value level of $112.30 and to reduce holdings on strength to my quarterly and monthly risky levels of $128.99 and $131.39, respectively. (For more, see: As Online Shopping Grows, UPS Sees Record Holiday Package Returns.)