close icon

FedEx Stock is in Free Fall. Is There a Bottom?

FedEx stock is plunging sharply after the company slashed profit targets and announced broad cost-cutting measures. The share price is down almost 41% from its all-time high of $273.66 reached in January, when everything looked so rosy. What happened?

Many experts would argue that the market finally realized that FedEx is not what it once was. The company’s fundamentals have been deteriorating in recent years, debt has been piling on and free cash flow has turned negative.

It is not a secret that market prices can move in the opposite direction of the fundamentals for a considerable amounts of time. FedEx is the latest example. However, knowing this did not help investors prepare for the imminent bearish reversal in the stock. The Elliott Wave Principle did, as proven by the chart below, published in mid-2017.

While FedEx stock was trading above $215 a share in June 2017, its weekly chart revealed a troubling picture. The uptrend from the 2009 bottom had taken the shape of a five-wave impulse, whose wave (5) was approaching to its end.

The Wave theory states that a three-wave correction follows every impulse, so it made sense to expect a major decline as soon as wave (5) ends. In addition, the company’s performance has been worsening, so caution was advised not only from the technical, but from the fundamental point of view, as well. The two methods of analysis do not always reach the same conclusion, but when they do, it is worth paying attention.
Elliott wave analysis ahead of FedEx stock crash
Picking tops is never worth the risk and FedEx is just another example of that fact. The bulls managed to keep the uptrend alive for another $60 per share until they reached the vicinity of $275 in January, 2018. However, they could not defy gravity forever and eventually made way for the bears, who cut the stock price almost in half in less than 12 months. In the end, investors who ignored the Elliott Wave warnings and kept buying only increased their losses.

The bad news is FDX’s woes are unlikely to go away any time soon. The support of wave (4) near $120 a share looks like a reasonable target for wave A of the larger A-B-C zigzag correction we believe is now in progress. Given the bad shape of the company and the bigger picture Elliott Wave outlook, we would not be surprised if this bear market erases all of the post-2009 gains.

In conclusion, it looks like there is still no bottom in sight for FedEx stock. Long-term bearish targets near $40 a share are plausible, which means the company can lose another 75% of its market cap from current levels. FDX may be down by 40% already, but it remains a very dangerous possession…

Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover similar dangers (and opportunities) yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Etsy Stock: The Easy Money’s Been Made Already

Three years ago, in January 2016, Etsy stock fell to as low as $6.04 a share. Yesterday, it closed at $54.59 a share. If you have been among the lucky few, who happened to pick the bottom and held until now, your annual compounded rate of return would be over 108% per year or 803%…

Read More »

Bank of America Riding the Earnings Wave… For Now.

The last time we wrote about Bank of America was on October 18th, 2018. The stock was trading below $29 a share, down from the $33.05 top reached in March. The bank had just reported a record first quarter, but the stock price was falling nevertheless. So in order to make sense of it, we…

Read More »

Boeing Stock Ready for a Final Ascent

The last time we wrote about Boeing stock was in early October 2018. In that article we shared our view that while BA was approaching the $400 a share mark, it was time for the bulls to play it safe. The Elliott Wave principle suggested that a bearish reversal can soon be expected, even if…

Read More »

Home Capital: From near Bankruptcy to Opportunity

Home Capital Survived in 2017 Home Capital investors had a volatile two years. The company almost went bankrupt in mid-2017. Allegations from the Ontario Securities Commission that management misled investors about mortgage fraud within its broker network led to a run on the bank. 95% of its saving accounts deposits disappeared as a result. On…

Read More »

Nvidia Stock Staging a Deceptive Elliott Wave Recovery

The last three months of 2018 may have been bad for stock market investors in general, but few suffered more than NVDA shareholders. Nvidia stock climbed to an all-time high of $292.76 a share on October 2nd. By December 24th it was down to $124.50, losing over 57% in less than 90 days. So it…

Read More »

General Mills Stock Staging an Elliott Wave Recovery

If you think the last three months have been bad for stock market investors, think about how General Mills stock investors must be feeling. GIS has been steadily declining since mid-2016. Two and a half years ago, the share price climbed to an all-time high of $72.95. Last week it fell to $36.42, so it…

Read More »

A Special Letter about the State of the Stock Market

Dear Fellow Elliotticians Most major stock markets have been in a bull market for almost a decade. Unfortunately, after last week’s selloff it is now evident that this bull market is over. The S&P 500 is down 17.8% from its all-time high reached three months ago, despite a still strong economy and relatively low interest…

Read More »

More analyses