Fed Ex has traded downwards, and we look to seek opportunity before countertrend occurs
Fed Ex has traded downwards, and we look to seek opportunity before countertrend occurs
FedEx after reporting earnings on December 19th 2023, the stock traded downwards immediately. Since the earnings report, the stock has started to settle into a price zone, and we think is due trade lower before it trades higher.
Several analysts price target cuts have been made since the earnings report, and industry outlook for the air and freight business has a negative outlook.
Based on several quantitative measures, we think the stock is trade downwards to around $235 a share. Based on standard deviation studies, we think the standard deviation needs to come down, and when the standard deviation narrows, we think a countertrend can occur to the upside.
The stock currently is sitting range bound after earnings, and once the breakdown from the range occurs we think the $235 a share level can be tested.
Our position is to do a put spread for February 9th expiration, buying a $250 put, and selling a $235 put, and we look to take profits when the stock reaches $235.
Over time the gap down should be filled, but right now we think that is a long shot away, and not to be concerned about until we see a meaningful outlook for the industry as well as Fed Ex. Given that Fed Ex is seen as a barometer for the economy, better economic environment should be a tailwind for upside in this stock. Once that occurs and outlook improves we see then the gap getting filled between $252 and $275.
Our risk management on this trade will be a significant break above $256 a share. If the stock trades meaningfully above $256, we look to cut our losses and exit this trade. We think breaking of $256 puts this stock into a uptrend.