FedEx FDX Breakout into Parabolic Arc Pattern

Oct 30, 2013: 12:34 PM CST

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:

FedEx FDX Stock Weekly Chart Breakout Uptrend Trend Following

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

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:

FedEx Weekly Arc Pattern Trendline Parabolic Arc Parabolic Trend Blow-off Top

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:

FedEx FDX Daily Chart Parabola Parabolic Arc Parabolic Trendline Angular Momentum Arc Trendline Climax Strong Trend

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

For additional reference posts on the Parabolic Arc or Arc Trendline trade/concept, study the following:

“March Crude Oil Structure and One of My Favorite (Arc) Patterns”

“March Check-up on (Intraday Arc Trendline) Internals at the Highs”

Arc Trendline on the Weekly US Dollar Index (still in motion)”

Key Inflection (and Arc Trendline Lesson) in Apple AAPL” (great lesson)

The Dominant “Arc” Trendlines to Watch this Week in Gold

Intraday Rounded Arc Playing out (SP500)

Lesson in Trading Intraday Arc Trendline Breaks/Reversals

Gold Trapped Between Rounded Arc Support and Horizontal Resistance

Log-View of the Arc Trendlines on the US Market Indexes (April 2010 ahead of “Flash Crash”)

Updated Arc Patterns on the US Indexes (again, ahead of “Flash Crash”)

Sell-off in Crude Oil from Intraday Rounded Reversal (May 10, 2010)

TLT “Arcs” Down into Support

I’ll be discussing breakout, retracement, and reversal trading tactics (including breakouts) along with a newly added presentation on the “Popped Stops Play” (applicable to failed divergences and persistent trends like this) live at the Las Vegas Traders Expo on November 22 – join me and your fellow traders at the free expo!

Las Vegas Traders Expo 2013

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “FedEx FDX Breakout into Parabolic Arc Pattern”

  1. Amazon AMZN and the Ongoing Parabolic Arc | Afraid to Trade.com Blog Says:

    […] We see a similar situation though not as cleanly structured with FedEx as I updated recently. […]

  2. Amazon AMZN and the Ongoing Parabolic Arc Says:

    […] We see a similar situation though not as cleanly structured with FedEx as I updated recently. […]