Chart of the Day: FedEx’s Long-Term Uptrend Ends As China Strikes Back

FedEx Weekly Chart

U.S.-Sino tensions have escalated yet further, following the U.S. ban against Chinese telecom giant Huawei. this past weekend, Beijing went after global shipper FedEx (NYSE:), claiming it diverted packages from Chinese customers, without authorization, “damaging [the] rights of Chinese clients.”

Regulators in the Asian country yesterday launched an ‘inquiry.’ Although Huawei or any trade-related keywords were not mentioned, there’s little doubt the timing isn’t accidental. Clearly, China is targeting FedEx in retaliation for the Trump administration blacklisting Huawei.

The equity market concurs. The Memphis-based company’s stock has fallen 4.75% since Thursday.

The stock crossed below its uptrend line since the 2009 bottom for the first time in ten years, suggesting an end to the long-term uptrend. However, price found support in the December lows. In other words, even if prices would continue lower, it could occur after extreme whipsawing.

In the long run, however, risk is to the downside. After crossing the long-term uptrend line for the first time, and as the 50 WMA crashed through the 100 WMA. Currently, the price is speeding toward a downward curving 200 WMA, below the previous medium-term trough in mid-April.

Trading Strategies

Conservative traders should wait for another lower peak in the medium-term, which would follow a medium-term trough below December’s.

Moderate traders are likely to wait for a decisive downside breakout below the $150.00 mark, followed by a return move that demonstrates obvious resistance.

Short Trade Sample

  • Entry: $150
  • Stop-Loss: $151, above December lows
  • Risk: $1
  • Target: $145, June 2016 lows
  • Reward: $5
  • Risk-Reward Ratio: 1:5

Aggressive traders may risk a contrarian, long position, counting on the most extreme oversold levels since the December rout and potential support at the December lows.

Long Trade Sample

  • Entry: $152
  • Stop-Loss: $151
  • Risk: $1
  • Target: $157, March, May lows
  • Risk-Reward Ratio 1:7

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