Should you buy or sell FedEx stocks after dropping to a two-year low?
FedEx (NYSE:FDX) dropped to a two-year low last week after missing estimates for the preliminary Q1 results. The giant air freight and logistics company employs over 440k people and has business operations all over the world.
For many years during Alan Greenspan being the head of the Federal Reserve, FedEx was seen as a bellwether of how the economy will perform in the future. Therefore, when FedEx warns about a softening in the global volume, it warns about an upcoming recession.
Moreover, the company withdrew its FY2023 earnings forecast, citing worse-than-expected macroeconomic trends. As such, the market participants sold the stock short, sending it to a two-year low.
So is it time to buy the dip, or is this just the continuation of a bearish trend that began over one year ago when the stock traded above $300/share?
FedEx stock price breaks dynamic support
Support and resistance in technical analysis may form either horizontally or in a dynamic way. The strongest levels, the ones where the market hesitates the most, are the dynamic ones.
A dynamic level follows the market price action. In other words, the price may trend higher or lower, and even if it makes new lower lows or higher highs, it may still find support or resistance at a dynamic trendline.
The problem arises when the price breaks the dynamic level. FedEx did just that.
The news shocked investors, and they quickly reacted by selling the FedEx stock short and triggering a massive drop in the stock price.
What comes next for the FedEx stock price?
The technical picture remains bearish, especially after the stock Price dropped below Dynamic support. The focus now shifts to where the COVID-19 rally started, meaning that a move below $100/share should not be ruled out.
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