The last time we highlighted FedEx Corp. (FDX) in our Daily Stock Report was on October 7, 2024, when the shares were at $260.84. The shares had just entered the red unfavored zone of the SIA S&P 100 Index report shortly before that report was published. Since then, the shares have continued to weaken further as the closing price is now at $209.85 which represents a 20% drop since the October 4, 2024, closing price.
This serves as another strong example of the importance of avoiding investments in the red Unfavored Zone. Many advisors may instinctively gravitate toward names in this zone under the assumption that they are oversold and present a “value buy” opportunity. However, what may appear to be a value buy can often turn out to be a “value trap,” where shares continue to decline—a scenario that has clearly played out in this case.
This reinforces SIA’s methodology not to pursue a “contrarian” mindset as names in the unfavored zone are not exhibiting any relative strength as the sellers are in control and not many market participants are looking at the name. The SIA Charts relative strength rankings help advisors identify stocks that are not just outperforming peers or index benchmarks, but in this case also underperforming peers or index benchmarks with such underperformance often signaling deteriorating investor expectations for company or sector growth. Currently, FDX resides in the #97 spot in the SIA S&P 100 Index report, down 30 spots in the last quarter.
Let’s dive in and see what the candlestick chart looks like to investigate what may lie ahead for FedEx Corp. Back in July of 2024, and November of 2024, we see a classic double top pattern where the shares bumped its head at the $300.00 level before a sustained downtrend materialized. In our last commentary in October, we identified $250 and the $231 as possible support levels but those did not hold. Of note, we see a long-legged doji candlestick appear which comprises long upper and lower shadows and the open and close prices of the security fall approximately close to one another. This formation signifies indecision in the market, where neither bulls nor bears dominate, and demand and supply are relatively balanced. As such, with the appearance of this candlestick, the $200 whole number support level is possible. To the upside, resistance is at $230 as prior support now becomes new resistance.
In looking at the Point and Figure chart we see a steady uptrend in place as of late 2022, up until the shares hit its top in July of last year. Since the summer top, the shares started to wane as a pattern of lower lows started to materialize into the fall, which has continued into this year. The most significant drop occurring earlier this month before finally finding a potential floor at the long term uptrend line at the $199.00 area. The shares are currently in a rising column of 4 X’s trying to regain some traction; however, there is currently no short-term strength whatsoever as the SMAX score is a 0 out of 10. Support can be found at its 3-box reversal of $199.04, which also coincides with the long-term uptrend line and proximity to the $200 psychological number. If this important support level does not hold, then next support is at $183.88. To the upside, If the shares can manage to rally further, resistance is at $224.15 and above that, $237.87.
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