Todays Big Stock: Fedex (NYSE: FDX)

FedEx Corp, the world’s second-largest package delivery company, released its fiscal 4th quarter earnings on Wednesday before the open. FedEx earnings increased 33% on stronger demand and being able to pass higher fuel costs on to its customers.

FedEx earned $558 million, or $1.75 per share, which compares with $419 million, or $1.33 per share, in the same period last year. Revenue increased 12 percent to $10.55 billion. Analysts had expected earnings of $1.73 per share on revenue of $10.4 billion. For the full year, FedEx earned $1.45 billion, or $4.57 per share, compared with $1.18 billion, or $3.76 per share, for fiscal 2010

FedEx is considered a bellwether of global economic health among analysts and economists because it ships a wide variety of goods. Its business reflects the ups and downs of business and consumer spending. Wall Street has so far applauded the release with FDX share being up 2% in pre-market trading.

Below is a 1 yr. chart of FDX (FedEX Corp) with my added notations:

FDX has two important price levels to watch for potential trading entries. The $90 level has been and important area of both resistance and support for FDX throughout the last 9 months. During the same period of time, $85 has been a strong level of support.

The Tale of the Tape: FDX has released its 4th quarter earnings report. The $85 and $90 levels are the prices to watch. Depending on your view, and market position, a short position could be entered on a rally up to $90 OR on a break below $85, while a long position could be entered at $85 OR on a breakout above $90.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT

Todays Big Stock: Rackspace Hosting (NYSE: RAX)

From time to time I like to give readers a heads up on potential trading opportunities. Before considering any trades outlined in this newsletter, always remember that you must decide for yourself if you personally like the trade.

One key factor in making that decision will be to decide which side of the trade you believe gives you the highest probability of success. In other words, do you like the short side of the market, or do you like the long side? You don’t necessarily have “know” what side to be on, but it certainly helps to take a stance. So, if you haven’t thought about it, review the overall indices themselves. Take a look at the S&P 500 for example.  Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

The trading opportunity that I’d like to review today is that of RAX (Rackspace Hosting, Inc).  Before discussing, please review the 1 yr. chart of RAX that I have outlined below, with my added notations:

RAX has formed two important levels over the last year. The first is the 9-month up trend line support (navy). The second would be the level of $40 (red), which has taken shape over the last 5 months.  Although a break of the up trend line does not by default mean RAX would be starting a downtrend, a break of the $40 level should confirm the start of a downtrend. As you can see, RAX has broken BOTH supports, thus should be moving lower.

The Tale of the Tape: RAX has recently broken (2) very important support levels. Because of this, RAX should continue lower as it begins the initial stages of a downtrend. A higher risk short position could be entered now, or a lower risk short position entered on a rally back up to the $40 level, if that occurs. Either way, a stop above $40 would be advised.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT


Todays Big Stock: eBay, Inc. (NASDAQ:EBAY)

From time to time I like to give readers a heads up on potential trading opportunities. Before considering any trades that I might outline in Chart School, always remember that you must decide for yourself if you like the trade.

One key factor in making that decision will be to decide which side of the trade you believe gives you the highest probability of success. In other words, do you like the short side of the market, or do you like the long side? You don’t necessarily have “know” what side to be on, but it certainly helps to take a stance. So, if you haven’t thought about it, review the overall indices themselves. Take a look at the S&P 500 for example. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

The trading opportunity that I’d like to review today is that of EBAY (eBay, Inc). Before discussing, please review the 1 yr. chart of EBAY that I have outlined below, with my added notations:

EBAY has created a common reversal pattern known as a Double Top. This type of price action typically occurs after an up trend and signals a potential reversal. Confirmation of this pattern, and the sign that the trend reversal should have started, would be a break of support. In the case of EBAY, the support for the Double Top pattern is $30. As you can see, EBAY has broken that support, thus should be moving lower.

Another piece of information that can be garnered from price patterns is their price projections. Simply take the height of the overall pattern from the support to the top of the “tops”, in this case $5 ($35 top – $30 support), and subtract that amount from the breakdown point of $30. This gives you a minimum price target of $25. Obviously, this isn’t a guaranteed forecast, but it does commonly materialize.

The Tale of the Tape: EBAY is a stock that has recently broken support and confirmed its Double Top formation. Because of this, EBAY should fall to a minimum of $25. A higher risk short position could be entered now, or a lower risk short position entered on a rally back up to $30, if that occurs. No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.

Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Titan International, Inc. (NYSE: TWI)

From time to time I like to give readers a heads up on potential trading opportunities. Before considering any trades that I might outline in Chart School, always remember that you must decide for yourself if you like the trade.

One key factor in making that decision will be to decide which side of the trade you believe gives you the highest probability of success. In other words, do you like the short side of the market, or do you like the long side? You don’t necessarily have “know” what side to be on, but it certainly helps to take a stance. So, if you haven’t thought about it, review the overall indices themselves. Take a look at the S&P 500 for example.  Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

The trading opportunity that I’d like to review today is that of TWI (Titan International, Inc).  Before discussing, please review the 1 yr. chart of TWI that I have outlined below, with my added notations:

TWI has created a common reversal pattern known as a Head and Shoulders (H&S). This type of price action typically occurs after an up trend and signals a potential reversal. Confirmation of this pattern, and the sign that the trend reversal should have started, would be a break of support (neckline) at $25. As you can see, TWI has broken that support, as well as its up trending support, thus should be moving lower.

Another piece of information that can be garnered from price patterns is their price projections. Simply take the height of the overall pattern from the neckline to the top of the head, in this case $6 ($31 top – $25 neckline support), and subtract that amount from the breakdown point of $25. This gives you a minimum price target of $19. Obviously, this isn’t a guaranteed forecast, but it does commonly materialize.

The Tale of the Tape: TWI is a stock that has recently broken support and confirmed its H&S formation. Because of this, TWI should fall to a minimum of $19. A higher risk short position could be entered now, or a lower risk short position entered on a rally back up to $25, if that occurs.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Microsoft (NASDAQ: MSFT)

Like a rude party guest, Microsoft’s (Nasdaq: MSFT ) timing always seems to be off. Less than a month after spending $8.5 billion on Skype, Microsoft saw the VoIP carrier’s software choke on an errant file, keeping some users from logging in and making calls yesterday.

“A small number of you may have had problems signing in to Skype. This predominantly affects people using Skype for Windows. We have identified the problem and will issue a fix in the next few hours,” the company wrote in a blog post. (Emphasis mine.)

All seems to be well now — for the record, I never had a problem — but the company’s steady parade of headlines like these must infuriate investors such as Greenlight Capital’s David Einhorn. He’s calling for Steve Ballmer to resign, saying Mr. Softy’s longtime CEO has spent shareholders’ cash on “ill-conceived mergers and acquisitions,” as The New York Times DealBook blog reports it.

Einhorn also says Ballmer is out of touch with the major market trends that have lifted the fortunes of Apple (Nasdaq: AAPL ) and Google (Nasdaq: GOOG ) in recent years. I disagree. He’s not out of touch — he’s off-key. Ballmer has no sense of timing.

Look at the Skype deal. Two years ago, eBay (Nasdaq: EBAY ) sold what amounted to a two-thirds stake in the VoIP leader for $1.9 billion. Now Ballmer has agreed to pay well more than twice that. Timing is everything, in life and in acquisitions.

To be fair, there are technical reasons for Ballmer to make the deal. Bundling Skype into Microsoft’s Office suite makes sense, and adding video calling to the Dynamics CRM product could disrupt salesforce.com (NYSE: CRM ) . Yet there’s also sure to be a ton of integration work needed, all of which must be done in a way that satisfies 700 million Skype accounts and 170 million active users.

Is that tradeoff really worth the company’s $8.5 billion price tag? Where’s the upside? Microsoft can’t simply be after Skype’s 700 million accounts. Mr. Softy is the world’s leading supplier of computer software. Its customer base numbers in the billions.

The only logical reason to buy the VoIP leader, then, is for its features. Frankly, I have doubts that Skype’s network is that much better than the varying alternatives, especially when small-business VoIP specialist 8×8 (Nasdaq: EGHT ) is growing outrageously. Why spend $8.5 billion when 8×8 commands just $210 million in market value as of this writing?

We’ve been over this before, I know. I’m raising these questions again because Einhorn did, too, when he alluded to “ill-conceived mergers and acquisitions” in his remarks. He’s clearly concerned about Ballmer’s ability to squeeze value from the Skype deal.

Yesterday’s technical hiccup won’t mean much to the overall equation. But it’s still a blemish for a company that’s suffered far too many for far too long, at far too high a price for shareholders. In that sense, I can appreciate Einhorn’s frustration.