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TECHNICAL ANALYSIS


Is FedEx Passing The Parcel?

11/22/04 02:02:22 PM
by Chris Manuell

Could the specter of higher interest rates be a speed bump for Fed Ex? Some bearish signs suggest a correction in the near term.

Security:   FDX
Position:   N/A

The level of interest rates heavily influences the Dow Jones Transportation Index (DJTA), and the recent tightening bias of the Federal Reserve may be starting to take its toll on the biggest component of the index -- FedEx. FedEx recently completed a bearish rising wedge on the daily charts, which is a pair of upward pointing converging trendlines that eventually intersect. The pattern was validated by the multiple touches on either trendline and also formed on contracting volume. A minimum objective for FedEx should be a swift move back to the origin of the formation in the 87 region. This may also correspond to the vicinity of the 89-day simple moving average (SMA), which has acted as formidable support on the previous two retracements.

FedEx's bearish rising wedge was also given further credibility by the completion of a bearish engulfing pattern on November 19. The bearish engulfing pattern occurs when a dark body engulfs the prior white body, except in certain cases where the prior candle is a doji. FedEx's bearish engulfing pattern is one of those exceptions; the session on November 18 was indeed a doji. This bearish engulfing setup increases the probability that an important turning signal occurred.

Figure 1: Daily chart, FedEx
Graphic provided by: StockCharts.com.
 
Oscillators also support the bullish fatigue argument as the relative strength index (RSI) and the moving average convergence/divergence (MACD) histogram both display signs that the momentum has faded. The MACD histogram recently completed a bearish crossover of the centerline and RSI has turned down from an overbought reading.



Chris Manuell

Chris Manuell spent 7 years as a futures sales/trader for a large investment bank and more recently as a technical analyst for an independent research company. He has a bachelor of economics and graduate diploma in applied finance & investment. Currently enrolled in the CMT program with the MTA.

E-mail address: chrismanuell5@yahoo.co.uk

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