In his first Executive Decision segment of Mad Money Monday, host Jim Cramer spoke with Malcolm Wilson, the current CEO of XPO Logistics (XPO) Europe and the incoming CEO for GXO Logistics, which will soon spin off from XPO.
Wilson said the current XPO Logistics consists of both transportation and logistics. The transportation components will remain with XPO while the warehousing and logistics businesses will become the new GXO Logistics, which he will head.
The new GXO will serve 30% of the Fortune 100, Wilson noted, and is driven by three emerging trends. First, is the continued popularity of outsourcing. Second is e-commerce, which accounts for 40% of GXO's business. The third is the trend toward industrial automation and robotics, an area where GXO was a first mover.
Let's check out the charts of XPO ahead of this spinoff and amid the stock's upgrade Tuesday by TheStreet's Quant Ratings service.
When we looked at XPO back on Feb. 23 we were cautious and wrote, "Broader market weakness could spill over to XPO. Longs should raise stop protection to at least $111. If a correction starts I want to get out early." Prices moved sideways until late March when they turned up to make new highs.
In this daily bar chart of XPO, below, we can see some bearish divergences that give us a little pause. Prices are still in an uptrend, trading above the rising 50-day moving average line and the rising 200-day moving average line. The trading volume has not expanded since late March as prices pushed up to new highs, and that is a bearish divergence. The On-Balance-Volume (OBV) line has made a lower high in April than March. This is another bearish divergence. The Moving Average Convergence Divergence (MACD) oscillator is pointed up above the zero line but the two moving averages are right on top of each other and thus we could quickly see a bearish crossover.
In this weekly Japanese candlestick chart of XPO, below, we see that prices are still in an uptrend but some caution flags are out. XPO is trading above the rising 40-week moving average line but the trading volume has been flat. The weekly OBV line has been stalled since December and has not made a new high to confirm the price gains. The MACD oscillator has turned up to a new buy signal but it is below its January peak.
In this daily Point and Figure chart of XPO, below, we can see a nearby price target of $144. Pointed in the right direction, but it suggests that the upside may be limited.
Bottom line strategy: Understanding spin-offs and such is above my pay grade, but the sense I get from the charts and indicators is that XPO could stall in the weeks ahead.
