The Bigger Picture: Five Years of Choppy Returns
Looking at FedEx (FDX) on a five-year weekly chart reveals a somewhat surprising story. After the pandemic-driven spike in 2021–2022 — when delivery demand surged as consumers shifted to e-commerce — the stock has only managed about a 23% gain from those levels. For a company of FedEx's stature, that represents relatively muted growth compared to the S&P 500 and other major indices over the same period.
The chart was largely choppy and directionless for years until a parabolic move to the upside emerged toward the tail end of this five-year window, eventually carrying the stock to all-time highs. While the near-term gains have been significant, the longer-term perspective shows a stock that has underperformed broader benchmarks.
The One-Year View: Optimism Meets Reality
Zooming into a one-year daily chart paints a more optimistic picture. FedEx has rallied substantially from year-ago levels, driven largely by enthusiasm around the company's cost-cutting initiatives — particularly its "DRIVE" program, which has focused aggressively on slashing expenses. These efforts are expected to bolster margins and profitability going forward.
However, there is an important caveat: the core delivery segment of the business has remained largely stagnant. The bullish thesis rests heavily on cost restructuring rather than top-line revenue growth, which introduces a degree of fragility to the narrative.
The stock reached all-time highs around $392 at the end of February, just before geopolitical tensions in the Middle East escalated. Since then, it has pulled back approximately 11–12% over about three weeks — a meaningful correction that bears watching.
Technical Signals: Key Levels to Watch
From a technical standpoint, several indicators are flashing caution. The RSI (Relative Strength Index), which showed overbought conditions throughout February, has now dripped down near the 40 level, suggesting waning momentum.
Two simple moving averages frame the current setup:
- 200-day moving average sits all the way down at $270, reflecting just how parabolic the recent advance has been — the longer-term average hasn't caught up.
- 50-day moving average rests at approximately $349, and the stock is currently testing this level. This has been a key area of support since last October.
Whether FedEx can hold the 50-day moving average heading into its earnings report is arguably the most critical technical question facing the stock right now.
A Bullish Options Strategy: The Call Diagonal
For those with a bullish outlook who want to capitalize on the pullback, a bullish call diagonal spread offers an interesting approach. This strategy takes advantage of volatility dispersion between different option expiration series — specifically, the elevated implied volatility in near-term options due to earnings event risk versus lower implied volatility in slightly longer-dated options.
The trade structure works as follows:
- Buy the April 17th (29 days to expiration) 340 strike call, which is in-the-money by about $9. This option carries a higher delta, meaning it reacts more like the underlying stock.
- Sell the March 20th (one day to expiration) 365 strike call, collecting premium inflated by earnings anticipation.
This creates a $25-wide call diagonal at a cost of roughly $16.50 debit ($1,650 per spread), which represents the maximum risk. The key advantage is that the debit paid is significantly less than the full width of the spread.
Risk and Reward Profile
The profitability dynamics of this trade are compelling:
- Breakeven sits around the $345 level — anything above that at near-term expiration generates a profit.
- Maximum profitability occurs at or near the $365 strike, which conveniently aligns with approximately one standard deviation of the expected move priced into the options market (roughly plus or minus 6%, or about $21 in either direction).
- Even if the stock rallies above $365 and heads back toward all-time highs, the position remains profitable — it simply doesn't reach its maximum potential.
The elegance of this setup lies in buying relatively cheap implied volatility in the April options while selling expensive near-term volatility driven by the earnings event. It is a strategy that respects the bullish technical and fundamental thesis while managing risk through defined maximum loss and favorable volatility dynamics.
Conclusion
FedEx presents a nuanced investment case. The cost-cutting narrative is real and potentially powerful for margins, but the stagnant core delivery business and the recent 11–12% pullback from all-time highs demand respect. The 50-day moving average at $349 is the line in the sand. For options traders willing to take a defined-risk bullish stance into earnings, a call diagonal spread offers a way to participate in potential upside while keeping exposure measured and volatility dynamics working in their favor.