Will Cheap Oil Boost FedEx Corporation’s (FDX) Earnings?

FedEx Corporation (FDX) is an international shipping, freight and business solutions provider based in Memphis, TN. At the time of this post (10:30AM CST), FDX is currently trading at 176.81, up 0.31% on the day. FDX is currently trading comfortably within the upper portion of its 52 week range of 128.17-183.51, and has remained in a strong uptrend for most of the year after gapping up over key 140 resistance on the daily chart following a positive fiscal year Q4 earnings reaction in late June. FDX stock is just one week removed from its printing 52 week highs on 12/8/2014, and the company is set to report fiscal year Q2 earnings tomorrow, 12/17/2014 before the opening bell.

Over the last eight quarters of earnings data available, FDX has traded overwhelmingly bullishly following earnings, moving higher on six out of eight sessions immediately after the EPS release. Volatility in FDX has been fairly modest post-earnings during this time period, with an average historical move of just about 3.0%. Currently the options market is pricing in a slightly larger than average move of approximately 4.36% following tomorrow’s earnings report based on the price of the ATM straddle. This percentage move would represent about a $7.75 change in FDX share prices by this week’s Friday expiration on 12/20/2014. As mentioned previously, FDX has remained in a very strong, bullish uptrend for the large majority of this year, and I am anticipating a continuation of this trend following tomorrow’s earnings release. In addition to the 52 week trend, FDX remains strong in the near term as well, trading well above the upward sloping Ichimoku Cloud and several relevant moving averages on the daily chart. Considering this ongoing bullish trend, I will be looking to get long this name before the close.

Trade: Buying the FDX Dec 180-185 Call Spreads for $1.35
Risk: $135 per 1 lot
Reward: $365 per 1 lot
Breakeven: $181.35