Bulkowski's FedEx (FDX 4) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): 3 flags, Adam & Eve double bottom, ascending triangle, descending triangle, head-and-shoulders top, broadening formation right-angled and descending.

Price drops below the head-and-shoulders top neckline (in this case, the signal is really at the price of the right-armpit low because of the down-sloping neckline. I show that with a thin, horizontal red line). It's a sell signal.

Answer 1 (buy?): Sell or short the stock because the breakout is downward.

Answer 2 (target?): Measure the height of the head-and-shoulders (from head to neckline directly below) and project the result downward from the breakout price. But where's the breakout price? With down-sloping necklines, if they are steep enough, you won't have price piercing the neckline. So, I use a close below the right armpit as the sell signal. The target in this example would be: (peak) 78.05 - 71.18 (neckline) = height = 6.87. (RS low) 70.07 - 6.87 = 63.20 is the price target. Price reaches the target just 51% of the time, so be conservative in your estimates.

Answer 3 (stop?): Volatility is 1.93. Adding this to the intraday high of 70.34 gives a stop of 72.27. That's the closest the stop should be. That places it in the middle of the flag that appears between the head and right shoulder. For safety, I'd probably place it above the right shoulder. That would mean a potential loss of 8%, which is reasonable.

This shows what happened to the stock. It continued lower until finding support at the triple bottom, 64.84 at its lowest. So, the stock missed the 63.20 target but with 51% meeting the target, that should not be a surprise.