July 29, 2021

1 stock to buy, and 1 to absolutely avoid this week: FedEx & Pinduoduo

Wall Street stocks closed on Friday as investors continued to gauge the impact of the recent surge in bond yields.

Over the week, le and le lost 0.5% and 0.8% respectively, ending their two-week streak of gains.

The underperformed, with the technology-heavy index losing 0.8% over the same period to experience its fourth negative week in five weeks.

The 10-year Treasury yield hit a new 14-month high, topping 1.75% at some point on Thursday, before retreating on Friday to finish around 1.73%. The benchmark rate started the year 2021 below the 1% mark.

Dow, S&P 500, NASDAQ and 10-year rate chart

Between another batch of notable earnings reports and important economic data – along with key testimony from Federal Reserve Chairman Jerome Powell to Congress – the week ahead is set to be another busy week on Wall Street.

Regardless of which direction the market is heading, below we highlight one action that is likely to be sought after and one that may see further decline.

Remember, however, that our time horizon is only for the coming week.

Stock to buy: FedEx

Shares of FedEx Corporation (NYSE 🙂 – which just posted their third consecutive weekly gain – had a good period recently, rising about 18% since the start of February as investors invested in cyclical stocks likely to benefit from the reopening of the economy.

This trend is expected to continue over the coming week, as more states across the country end lockdowns and ease home care measures, given progress on the vaccine front.

FDX stock – which has gained 150% in one year – closed at $ 279.58 on Friday, not far from its record of $ 305.59 reached on December 9.

At current levels, the Memphis, Tennessee-based shipping giant has a market cap of around $ 69.8 billion.

FedEx Daily Chart

FedEx Daily Chart

Investor sentiment was boosted last week, when FedEx reported earnings and revenue for the fiscal third quarter that easily beat expectations, in large part due to strong shipping volumes.

Earnings per share climbed 146% from the same period last year, to $ 3.47, well above the forecast of $ 3.30. Revenue, meanwhile, climbed 23% year-over-year to $ 21.5 billion, well above estimates of $ 19.9 billion.

To add to these encouraging figures, FedEx management also provided optimistic forecasts for the full year, the first it has released since its outlook was suspended a year ago due to uncertainty. surrounding the COVID-19 pandemic.

Chairman and CEO Fred Smith said in the company’s earnings statement:

“We expect the demand for our unparalleled e-commerce and international express solutions to remain very high for the foreseeable future.”

In addition, the technical charts also look promising after FDX shares surpassed their 50 and 100 day moving averages (DMA) on Friday, for the first time since late December.

FedEx 50-DMA, 100-DMA

The last time these key chart levels were recovered, in July 2020, FDX was up 125% in the span of five months.

Actions to avoid: Pinduoduo

After plunging nearly 12% last week, Pinduoduo (NASDAQ 🙂 stock looks set to sit on the sidelines in the coming days as investors continue to worry about the negative impact of several weighing factors. on the Shanghai-based e-commerce giant.

PDD stock ended Friday’s session at $ 141.80, more than 33% below its all-time high of $ 212.30 reached on February 16, giving the Chinese ecommerce technology company a market capitalization of $ 173.9 billion.

Despite the recent pullback, stocks are still up about 319% in the past 12 months as Chinese consumers shifted their online shopping habits in the wake of the COVID-19 pandemic.

PDD bearish channel

Sentiment towards the fast-growing online marketplace collapsed last week following the surprise departure of its founder and chairman, Colin Huang, China’s third richest man with an estimated fortune of about $ 50 billion.

Chen Lei, who replaced Huang as CEO of PDD last July, will now assume the additional role of company chairman.

The surprising resignation of Huang, 41, comes amid increasing surveillance by Chinese authorities. As part of this surveillance, the authorities are targeting the country’s Internet sector, which is becoming increasingly powerful. They are thus trying to curb the tech giants who have succeeded in developing a dominant force in the consumer sector.

With 788 million annual active users, Pinduoduo recently overtook Alibaba Group Holdings Ltd ADR (NYSE 🙂 as China’s largest e-commerce platform.

Separately, the weak technical picture is also likely to weigh in after PDD shares closed below their 50DMA and 100DMA for the first time in more than five months on Friday.

Daily PDD chart

Many investors often view the 50 and 100 DMAs as effective indicators of the stock’s short-term trend, with a price above these values ​​signaling an uptrend, and stock below these values ​​indicating further weakness.