Since I do not post much about individual equities (maybe this will change in the future), I will keep this post short and mostly technical. Nevertheless, some extremely significant fundamentals will be analysed. The purpose of this post is to analyse FedEx's performance and their correlation with the expected performance of the US economy in the next 3-4 Quarters. Key word: Expectations.
Starting-off with the technicals. On the monthly chart, FDX is nearing a bearish cross/squeeze on the cloud. This is quite crucial as the previously served as a buy zone in 2016 and 2012. At the end of 2018 and the sell-off, the primary support levels for FedEx were the 100 Monthly (turquoise line) near the . Unfortunately, this outcome only served as a , and with the recent miss the cross finally happened. At this moment and time in September, the last monthly candle simply looks very nasty( ). As labelled from the chart, the next support zones are the previous bottoms from 2016 and the peaks of 2007 ~122-132$. Now, let's dive into the fundamentals and compare FedEx to the dow benchmark for delivery and transportation services.
https://ibb.co/KqshGCX (DJUSAF- Delivery Services)
https://ibb.co/LRhQMRy (DJUSTF- Transportation Services) Unfortunately, these charts can't be accessed on Tradiview due to regulations.
FedEx blamed the recent miss on the US/China Trade war stall and the split with Amazon. This is fair, but is there more to it? From the 2 links above, it's clear that the two industries haven't performed as well as compared to some of the other cyclical industries. DJUSAF/DJUSTF can be considered somewhat middle of the pack between cyclical and defensive, depending on the factors considered. Perhaps FedEx is struggling, but so are these fundamental industries as a whole. The last miss from FedEx was not as large as the previous one, yet it seems that the expectations were that it will perform just as well as the rest of the SPX /Dow companies. The main issue at hand is, whether this poor performance can improve our expectations on, how the economy will perform in the next four critical and highly risky quarters (Q3;Q4- 2019, Q1;Q2- 2020)?
(https://ibb.co/7rsZQpt) Credit to the Cass Freight inc.
The recent report from the Cass Freight Inc. suggests that there is a major downtrend in trading across the US and globally. FedEx's lowering their 2020 guidance is not a mutually exclusive issue to the downtrend in trading volumes. Essentially, the worst case outcome of these two events is that, they can be seen as recession foreshadowing factors. Without a doubt their performance can be considered as fundamental to a healthy and growing economy.
To wrap up this post just like every other one from my past 10 posts- since the summer and in the following quarters, expecting a speculation game. On the chart above the primary FedEx targets are marked in case there's a US/China trade deal. Otherwise, as things stand, the most likely pattern is the drawn ABC. Depending on the timing of the bad news in the worst case, could expect a direct drop to ~60,65$. Keeping a close look at FedEx and the performance of some of the fundamental/defensive industries in the next couple of quarters will be essential.
This is it for FedEx , hope at least someone found this post useful! I'd really appreciate any comments with insights on FedEx or similarly fundamental stocks.
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1. Part two- US10Y , US 10 Year Treasury note Yield tradingview.com/chart/ US10Y /kH1DVEC1-10Y-US-TREASURY-NOTE-PREMIUM-LONG-TERM-YIELD-ANALYSIS-PART-2-2/
2. The uptrend in analysis: tradingview.com/chart/ /JqftOGwh-RECESSION-IMPENDING-MEDIUM-TERM-VOLATILITY-VIX-PREMIUM-ANALYSIS/
3. FED Rates Supercyclical analysis: tradingview.com/chart/ FEDFUNDS /H2iTE7ig-RECESSION-IMPENDING-PART2-FED-RATES-SUPERCYCLE-PREMIUM-ANALYSIS/
4. US Industrials XLI: tradingview.com/chart/ XLI /BJZMjxLn-EPISODE-5-11-US-INDUSTRIALS-BULLISH-CHANNEL-STRUCTURAL-XLI-TA/
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Clean chart in case anyone is interested for educative purpose.
The Tesla Tree, that can be applied to FDX too since most of the risks included in the tree are not idiosyncratic to Tesla. You can read more about the tree in my post on Tesla linked below.
Question is, what's the absolute potential upside for the SPX in 2020. Best scenario, a deal gets done phase 1 and even if we have 2 more rate cuts to 1%, it would be +10-15%, to ¬3500ish. Even this is a stretch. But there are not sellers either, because the downside is limited mostly by QE. Meaning, expectations should be that market will be sluggish for the next 1-1.5 years before something major occurs.