Technical Alert On FedEx: Look Both Ways When Using Major Resistance Level

FedEx Corporation FDX shares were trading higher by $9.50 at $12.15 in Wednesday's session. The catalyst for the monster rally is a Q1 beat. This is Quite an unusual move for the issue, but that can happen when favorable fundamental news is delivered.

In these instances, there are two different ways to use a major resistance level. For this issue, it's hard to argue that the $169.50 area was a major resistance point. The reason being, it made four consecutive highs from $169.27 to $169.57 on August 19-24. Obviously, there was a large seller at that at area and when the seller or group of sellers were not able to unload on strength, they ended up having to exit on weakness or wait for the issue to revisit that level.

Therefore, with the issue trading over $170 in the premarket, one may bank on sellers coming back into the stock and driving it lower. Also, longs going into the report may attempt to lock-in some immediate gains and push the issue lower.

The other and much more difficult way to use that level on the open would be a bonafide breakout to the upside. The thinking behind that strategy is shorts may be scrambling after a breach of an important resistance level along with short-term momentum traders going with a strong day trend.

One way to determine whether or not the issue was a fade or not was to focus on the opening print. It turned out to be the exact low of the day ($170.61), inflicting more pain on current shorts as well as putting any new ones under water.

As difficult as it may be, try to look both ways when an issue approaches a major resistance off good fundamental news.