Here’s how you can trade two conflicting charts on FedEx (FDX) (December 11, 2014)
I want to look at Fedex ( NYSE:FDX ). I’ve got this snapped in between a bunch of Bollinger Bands here, one standard deviation and two standard deviations. When a stock is trending higher you’re typically going to see it trading within this range, like in between the 20-day moving average and then the second standard deviation Bollinger Band.
One way that you can kind of access the trend, there’s a bunch of them and they’re all pointed to the same thing, is the stock going up or down, and how likely is it to stay that way? You want to look and see where the stock is trading; here it’s tended to trade in between the first and second standard deviation. The trend is up but it’s hard to buy. It’s hard to buy the stock when it’s in between this first and second deviations, it’s kind of the strongest period for the stock, just like it was hard to buy here.
But then ultimately here’s the point, it’s hard to buy. Why? Because you’re afraid the stock’s going to peak. But ultimately the stock will drift sideways, even a nice up trending stock at some point, is going to start drifting sideways and give you a better opportunity to buy the stock. So you don’t have to worry so much about buying at the high.
What I’m saying here is the stock has been really choppy; we’ve had a lot of fuel issues, energy, and oil, all of that kind of stuff. So I’m looking at this now after three days, Monday, Tuesday, Wednesday and today being Thursday also really being a down day, it was up 42 cents but look where it opened. It opened; it gapped up along with so many other stocks and then traded lower.
So what I’m suggesting though is, right now if you’re looking to get in to Fedex ( NYSE:FDX ) this is probably about as good of entry as you’re going to get on a shorter-term time frame. Now you look at the stock, it’s been trading up here, it seems like it’s going up forever; it is definitely over extended, definitely over extended.
Bearish engulfing pattern here, that means the stock is gapped up above this last bars high and it’s now trading down below this last bars; not intra-period or intra-week low, but at least where it opened up, so it’s engulfing the box. It’s not yet down below last week’s entire trading range, not quite yet, it looks like it could be going there. So you may get a steeper correction on this weekly chart, or not.
What I would suggest doing is if you tend to be a shorter-term trader, you look at buying some of this stock right here at the 20-day moving average. A little bit of stock, not the perfect entry; the perfect entry, at least in this chart, has been like the 50-day moving average; that’s not even 5 percent below where this stock is now.
You take some stock here, because you’re nodding to the gods of Wall Street that this stock is trending higher and you don’t want to buy it up too high. So you know you are definitely buying it off the highs a little bit, but then you also give a nod to the gods on the weekly chart and say, “If the stock goes lower I don’t want to be holding a big slug of it, so I’ll take a little bit of it now, and then if the stock pulls back 170.00-171.00 then I’ll consider adding more.” So that’s how I would look to trade Fedex ( NYSE:FDX ).
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