FedEx, Stocks of Steel and a Friday Earnings Preview
The Fall of FedEx
Shares of FedEx (NYSE: FDX) pulled back by nearly three and half percent on Thursday as traders sold the news of the company’s quarterly earnings announcement. And while many will focus on the company’s minor revenue miss and/or its overly optimistic assessment of how quickly the economy would improve over the past year, the fact of the matter is that FDX was nearing overbought territory heading into Thursday, and that a pullback, before or shortly after the catalyst of the earnings announcement, would not necessarily a surprising response.
The drop to new, one-week lows has taken FDX to the edge of oversold territory. And if sellers remain aggressive on the final trading day of the week, it is very possible for the stock to head into the weekend technically oversold. As of Thursday’s close, FedEx has a short-term, positive edge of more than three-quarters of a percent, and neutral, 6 out of 10, ratings earned after an intraday two-point ratings upgrade.
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Friday Earnings Preview: Darden Restaurants and KB Home
Two companies are pulling back ahead of scheduled earnings announcements on Friday: Darden Restaurants (NYSE: DRI) and KB Home (NYSE: KBH).
Shares of DRI pulled back by nearly 1% in Thursday’s trading, more than enough to take the stock into technically oversold territory above the 200-day moving average just days after DRI had rallied to new, 6-month highs. Now down two in a row and trading near two-week lows, Darden Restaurants has a short-term positive edge of a third of a percent and has earned a one-point ratings upgrade to 7 out of 10.
With a significant, positive edge of one and a quarter percent in the short-term, KB Home has traded lower for five days in a row to reach new, two-week lows ahead of the homebuilder’s scheduled quarterly earnings announcement on Friday. Having closed oversold for the past two days in a row, KBH has earned “consider buying” ratings of 8 out of 10.
Last in oversold territory as part of a pullback to new, two-week lows at the beginning of the month, shares of KBH climbed for seven days in a row, gaining more than 20% en route to new, multi-month highs.
A Sell-Off Among the Stocks of Steel
Traders and investors have been moving aggressively out of steel stocks in recent days, sending U.S. Steel (NYSE: X) back into bear market territory and dragging rivals like Nucor (NYSE: NUE) and Steel Dynamics (NASDAQ: STLD) into short-term oversold territory above the 200-day moving average.
Trading lower for three days in a row, shares of Nucor Corp are likely to trade oversold on any additional selling on Friday. The stock is trading near two-week lows, but managed to close well off its worst levels of the day on Thursday. NUE has a positive, short-term edge of just under a third of a percent, and neutral, 6 out of 10, ratings.
By contrast, shares of Steel Dynamics are set to open Friday morning with a positive edge of nearly 2% in the short-term, and a 7 out of 10 rating, putting the stock at the upper boundary of our “neutral” category. STLD has been trading in bull market territory only since mid-January, but the current pullback represents the stock’s third retreat to technically oversold territory in just over two months.
STLD finished trading on Thursday down more than 4%. NUE closed lower by more than one and a half percent.
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David Penn is Editor in Chief of TradingMarkets.com