While many stocks are trending higher in 2021, United Parcel Service Inc. (UPS) is trading lower and is approaching a key support level. If this level is broken, a breakdown could ensue.
UPS is the world’s largest parcel delivery company. It manages a massive fleet of more than 500 planes and 100,000 vehicles, along with many hundreds of sorting facilities, to deliver an average of about 22 million packages per day to residences and businesses across the globe.
UPS is benefiting from a meaningful increase in home deliveries due to the coronavirus pandemic, as the need for door-to-door delivery of essential products has risen. Even with the rollout of the vaccine, e-commerce demand is likely to be strong for some time. UPS should also benefit from the distribution of the coronavirus vaccines.
As of the end of the last quarter, UPS had $9.2 billion in cash, slightly up from the previous quarter. Long-term debt was $25.8 billion, but short-term debt was only $2.4 billion. The company also has a solid return on invested capital of 15%.
UPS has a stable history of sales growth, up an average of 6.6% over the past five years. Earnings are expected to grow 35.7% next quarter, and 10.2% next year. Its stock has a trailing P/E of 30.15 and a forward P/E of 18.21.
While UPS stock is up 39% over the past year, it has shown bearish momentum over the near-term. This has led to a “Neutral” rating in our POWR Ratings system, and is reflected in the chart below.
Take a look at the 1-year chart of UPS below with added notations:
Chart of UPS provided by TradingView
UPS has formed a major level of support at $155 (green) over the past several months. The stock has rallied off that mark a few times already, and now it seems to be falling back down to the $155 level again. Another bounce could follow, but if the support were to break, lower prices should follow for UPS.
If the stock were to break below the $155 support level, a short position could be entered with the expectation of a breakdown.
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UPS shares rose $0.48 (+0.30%) in premarket trading Thursday. Year-to-date, UPS has declined -4.80%, versus a 2.74% rise in the benchmark S&P 500 index during the same period.
About the Author: christian
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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