The last time we wrote about FedEx Corp. stock was over a year ago, on September 2015, when it was trading around 150 dollars a share. In “FedEx Uptrend Far From Over”, we applied the Elliott Wave Principle to the weekly chart of FedEx and it suggested it was too early for the bulls to abandon ship, because the uptrend was likely to resume and reach new all-time highs in the not so distant future. Here is how the analysis looked like back then.
As visible, we thought the post-2009 recovery was then in its wave (4), which was supposed to be followed by another bullish run in wave (5). The 38.2% Fibonacci level and the lower line of the trend channel were expected to discourage the bears and give the start of this fresh leg up. As the chart shows, FedEx was likely to reach the $190 mark and that is why we stated that its uptrend is far from over. The updated chart below shows how FedEx has been developing during the 21 months after that forecast.
Obviously our timing was not the best one, because wave (4) actually bottomed out at $120. Nevertheless, it remained far away from the top of wave (1) so the uptrend was still in progress. Even though the bulls did not lift the prices immediately, sticking to the count was the best decision, since FedEx shares are now hovering around $215. Trouble is, that the stock’s uptrend is not so far from over anymore. Wave (5) already exceeded the top of wave (3) and it looks like a complete five-wave pattern. The problem is that according to the Wave Principle, every five-wave impulse is followed by a three-wave correction in the opposite direction. In our opinion, investors should leave immediately, because the stock seems ready to dive towards the support of wave (4) around $120 once again. And this is the bright outlook. The monthly logarithmic chart below reveals an even grimmer one.
The monthly chart shows the entire bull trend since the year 1978. From an Elliott Wave point of view, it is hard not to get scared by looking at it. It suggests that the five-wave recovery since 2009 is nothing more that the fifth wave – V – of the impulse, which began over 38 years ago with the company’s IPO. In this case, the anticipated three-wave correction could be much bigger and cause a plunge to the termination area of wave IV, instead of just wave (4) of V. This means the 2009 lows near $34 a share could be revisited. This is not that hard to imagine, if we have in mind FedEx’s last reported book value per share of $53.21 and three year average P/E ratio of over 33. It turns out that both Elliott Wave and fundamental analysis claim FedEx stock is too overvalued. We would like to add that it is among the most dangerous possessions the stock market could currently offer.