As FedEx Goes...

01/14/10 09:03:19 AM

by Alan R. Northam

There's a saying. Have you heard of it? "As FedEx goes, so goes the rest of the market." FedEx is in the transportation business, moving manufactured goods to distribution centers and to retail outlets, among other things. The movement of goods from one point to another indicates a demand by consumers for these goods. As long as goods are being moved, there also exists a demand to manufacture goods. The manufacturing of goods, the transportation of goods, and consumer retail spending is good for the economy and the stock market.

Security: FDX
Position: N/A

To analyze FedEx using the Andrews pitchfork, the first thing to do is find the significant pivot points. I do this by by first finding the lowest low pivot and labeling it P0. I then draw an upward trendline at such an angle until it touches a price low and that no other price low breaks down below it, as I have shown in Figure 1 and labeled it P2. P1 is then the highest high between P0 and P2. Significant pivot point P4 is then located as the pivot point that comes closest to the trendline. P3 is then identified as the highest high between pivot points P2 and P4. Having found the first four pivot points P1 through P4, the final P5 needs to be identified. Alan Hall Andrews recognized that five significant pivot points are developed in an upward trend before the trend comes to an end. Therefore, before the upward trend should be expected to end, a final significant pivot point P5 needs to be identified. See Figure 1.

FIGURE 1: FDX, DAILY. This chart shows the significant pivot points and the pitchfork.

Graphic provided by: AmiBroker.com.

Once the first four significant pivot points are identified, it is then possible to draw in the Andrews pitchfork. When trying to identify a final P5 pivot point, the pitchfork is drawn between pivot points P0, P3, and P4 instead of P0, P1, and P2 as shown in Figure 1. Alan Andrews then expected the final P5 pivot point to develop once price reached the median line of the pitchfork (ML). Note in Figure 1 that price did reach the median line but continued along the median line for a while and then started to move above it. When price moved significantly beyond the median line, Andrews would draw a new more steeply defined pitchfork using pivot points P2, P3, and P4 instead of the normal P0, P3, and P4 pivot points (see Figure 2).

FIGURE 2: FDX, DAILY. Here's Andrews pitchfork drawn off significant pivots P2, P3, and P4.

Graphic provided by: AmiBroker.com.

Figure 2 shows the Andrews pitchfork drawn off the P2, P3, and P4 significant pivot points. Again, Andrews would then look for price to reach the area of the median line for P5 to develop. However, again price has moved significantly beyond the area in which price first came into contact with the median line. Under such circumstances, Andrews recognized that price was extending higher and would then draw a new pitchfork off the last three pivot points, as shown in Figure 3. Note that these last three pivot points are not significant pivot points but are normal minor pivot points that develop during the course of the final upward push that identifies the final P5 significant pivot point.

Figure 3 shows a pitchfork drawn off the last three minor pivot points. Note that price is now trending upward toward the median line (ML). The final significant pivot point of the upward trend should develop once price comes into contact with the median line. In addition, P5 should form at a new higher high price. To identify when this might occur, I have drawn a red dashed horizontal line off the highest high made in December. Note that this line crosses the median line on January 15, 2010. Therefore, I would not expect P5 to develop until after January 15. However, if price does not make it to the median line, turns down and crosses below the lower horizontal line of the pitchfork (L-MLH), then a price failure will have occurred, which then indicates a reversal in trend from up to down.

FIGURE 3: FDX, DAILY. Here's the Andrews pitchfork drawn off last three minor pivot points.

Graphic provided by: AmiBroker.com.

In conclusion, a trend in motion stays in motion until proven otherwise. FedEx is still in an upward trend until either price makes a new high and turns down or a price failure occurs. As long as a price failure does not occur, expect price to move up to the median line from the final significant pivot point P5 and then turn down to end the upward trend and ring in a new significant downward trend. Remember: As FedEx goes, so goes the rest of the market...

Alan R. Northam

Alan Northam lives in the Dallas, Texas area and as an electronic engineer gave him an analytical mind from which he has developed a thorough knowledge of stock market technical analysis. His abilities to analyze the future direction of the stock market has allowed him to successfully trade of his own portfolio over the last 30 years. Mr. Northam is now retired and trading the stock market full time. You can reach him at inquiry@tradersclassroom.com or by visiting his website at http://www.tradersclassroom.com. You can also follow him on Twitter @TradersClassrm.

	Garland, Tx
Website:	www.tradersclassroom.com
E-mail address:	inquiry@tradersclassroom.com

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Comments

Date:�01/14/10Rank:�3Comment:�

Date:�01/20/10Rank:�5Comment:�Outstanding article: although I knew about Andrew s PF this goes further. One question: you wrote One of the useful aspects of the Andrews pitchfork is that it can be drawn from any series of three alternating high and low pivot points . But what if then the Pivot 0 is higher than the pivot 2 (supposing a new bull trend)? Is that count acceptable? Please see this link as illustration: http://screencast.com/t/NDBjNzYyN2 Thank you for your highly valuable articles. Carl Vanhaesendonck.

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ANDREWS PITCH-FORK

As FedEx Goes...

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