United Parcel Service, Inc. (UPS) is a global package delivery company preparing to report earnings before the open on Wednesday, July 24, with the stock trading just below its all-time intraday high of $135.54 set in January 2018.
UPS shares closed the first half of 2019 on June 28 at $103.27, which became a key input to my proprietary analytics. Left over from the first half of the year is the annual risky level at $124.81. The risky level for the second half of 2019 is $116.12. The pivot for July is $103.65. The third quarter pivot is $123.20.
The daily chart shows a "death cross," and the weekly chart has been positive since the week of June 21, when the stock closed at $102.17. Fundamentally, UPS is fairly valued with a P/E ratio of 14.57 and a favorable dividend yield of 3.72%, according to Macrotrends.
Analysts expect UPS to report earnings per share of $1.93 when it releases results before the opening bell on Wednesday, July 24. Some on Wall Street expect disappointing results on sluggish revenue growth and higher costs. This includes slower global growth, particularly due to exposure in China. Others say that the stock has value and should be bought for the solid dividend.
The daily chart for UPS
The daily chart for UPS shows the formation of a "death cross" on Nov. 28, when the 50-day simple moving average declined below the 200-day simple moving average, indicating that lower prices lie ahead. This tracked the stock to its Dec. 24 low of $88.89.
There was a price gap lower on a negative reaction to earnings on Oct. 24. There was a price gap higher on Jan. 31 on a positive reaction to earnings. There was a huge price gap lower on the earnings miss reported on April 25 that quickly prevented the potential "golden cross." This led to the setting of the 2019 low of $92.65 on May 31.
The close of $103.27 on June 28 was an important input to my proprietary analytics. The stock is between its monthly pivot for July at $103.65 and its quarterly pivot at $107.79. Semiannual and annual risky levels at $116.12 and $124.81, respectively. The stock is between its 50-day and 200-day simple moving averages at $100.37 and $105.83, respectively.
The weekly chart for UPS
The weekly chart for UPS is positive, with the stock above its five-week modified moving average of $103.04. The stock is below its 200-week simple moving average, or "reversion to the mean," at $108.91. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 53.93 this week, up from 46.34 on July 19.
Trading strategy: Buy UPS shares on weakness to the 50-day simple moving average at $100.37 and reduce holdings on strength to quarterly, semiannual, and annual risky levels at $107.79, $116.12, and $124.81, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on June 28. The quarterly level was also changed at the end of June.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.