FedEx Corporation (FDX) Breakout Into Parabolic Arc Pattern

I’m a big fan of Parabolic Arc Patterns or Parabolic Trendlines, and FedEx (FDX) shares have morphed into a classic Arc Trendline Pattern after its weekly breakout as buying pressure accelerated.

Let’s start with the initial breakout then study the Arc Pattern currently in motion:

After a lengthy Ascending Triangle from 2011 until the 2013 breakout, price remained contained within compressing trendline boundaries.

[Related -Plug Power Inc. (NASDAQ:PLUG): Can FedEx Deliver $10 for PLUG?]

Price broke above the $95.00 per share upper resistance level in January which was confirmed with a surge in volume and momentum, suggesting a movement into a new uptrend phase.

The initial pullback took price temporarily within the trendline pattern to support off the lower rising boundary into April and price erupted into a second breakout which has continued relentlessly to this day.

In the process, price and momentum accelerated into a parabolic arc which is seen best on a pure price chart devoid of indicators:

[Related -Plug Power Inc (NASDAQ:PLUG) and FedEx Corporation (NYSE:FDX): A Green Producing Relationship]

Almost like a tipping point, price (supply/demand relationship) morphs into a powerful feedback loop of upside momentum.

Buyers enter – or add to existing positions – while short-sellers capitulate and buy-back short-sold positions as stop-losses are triggered at higher levels.

The supply/demand relationship develops into a fevered pitch which takes the form of a rising trendline or ‘arc’ trendline on the charts.

Remember, all chart patterns are expressions of the supply/demand relationship over time – patterns tend to repeat because investor/trader psychology tends to repeat.

The quick implication of an Arc Trendline Pattern is that price tends to morph “parabolic” or strongly impulsive to the upside and then ‘collapse’ or retrace lower once price breaks down under the lower rising – almost vertical – trendline.

While it may be logical, it’s extremely risky to “short” or fade the final phase of a parabolic arc pattern (much of the price movement can develop in the final phase of the pattern – shares have moved 20% higher from $110 to $135 in the last month alone).

It’s also risky to “buy and hold” or blindly play bullish strategies as the arc trendlines morph parabolic – the risk is for a ‘collapse’ of price on a break of the lower arc.

Very aggressive traders can continue to hold the stock on a watchlist for any potential ‘trigger’ or breakdown entry signal on the break through the lower ‘arc’ trendline.

We can see the pattern and trendline clearer on the Daily Chart:

Note the series of reversal candles in the context of a phase of declining (diverging) volume as price reaches its parabolic climax.

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