📈 Resilient Trader Trade Idea: The UPS Breakout and Mean Reversion Play

Resilient Trader is where smart traders come for vetted ideas.

Every week, we cut through the noise and surface opportunities that institutions are already eyeing - but with strategies tailored for retail traders. Today’s setup? A logistics giant waking from a three-year slumber, ready to close the gap with its biggest rival.

We’ll cover:

• Why UPS is a Buy at current levels

• How to structure a trade with long stock and income-generating options

🔍 Trade Thesis: UPS is Breaking Out and Leaving FedEx in the Dust

United Parcel Service (UPS) has been stuck in the mud for three years, but the engine is finally revving. After a long consolidation, the stock is showing signs of a major breakout, and we think it’s just getting started.

Behind the scenes:

🚚 Freight Demand is Back: PACCAR dealer traffic shows a sharp reacceleration in truck orders, the strongest reading since November. More trucks on the road means more packages for UPS.

📈 Distribution Centers Humming: Traffic at both UPS and FedEx distribution centers is picking up, confirming that the transport-long thesis is on the right track.

🆚 Mean Reversion Opportunity: UPS is trading at a massive discount to FedEx, a gap that has reached a three-year extreme. We see a classic mean reversion setup where UPS is poised to play catch-up.

📊 The Fundamentals Are Turning the Corner

Let’s break it down:

💰 Revenue: Q3 2025 revenue was $21.4B, with Q4 guidance pointing to a sequential improvement to $24.0B.

📈 Margin Expansion: UPS is strategically cutting low-margin Amazon business to focus on profitable SMB and healthcare clients. The goal is to hit a 12% US operating margin by the end of 2026, up from 7% in Q1 2025.

💸 Cost Savings: The company has already achieved $3.5 billion in cost savings in 2025, with more to come from automation and efficiency gains.

📐 Valuation Is Compelling

UPS is priced for a comeback:

⚖️ Relative Value: UPS trades at a significant discount to FedEx. While FDX is near its 52-week high, UPS is still down over 20% from its peak.

💎 Intrinsic Value: Our analysis suggests UPS is undervalued by about 17%.

🏷️ Dividend Yield: A healthy 6.16% dividend yield pays you to wait for the thesis to play out.

🧭 Technicals Confirm the Breakout

✅ Three-Year Consolidation Breakout: The stock is emerging from a long-term base, a powerful technical signal.

✅ Bullish Indicators: All our technical indicators are flashing bullish across short, intermediate, and long-term timeframes.

✅ Support/Resistance: Strong support in the $105-106 range, with a clear path to the first resistance at $109.67 and then on to the 52-week high of $136.99.

💰 Current price: $108.5

🎯 Targets: $120 (initial), $130+ (intermediate)

💥 Trade of the Week: Long Stock with an Options Kicker

We’re going long the stock and using options to generate income and define our risk.

🟢 Trade Setup

• Buy UPS at the current level of $108.50

🛡️ Options Play

• Sell the Feb 20th $100 put for $1.75. This gives you a credit and an obligation to buy the stock at $100 if it drops, a level we see as strong support.

• Continue selling 30 delta puts until the stock hits our first target of $120.

• Once at $120, start selling 30 delta calls against your long stock position to generate further income.

📈 Risk-Reward

• Risk: Your risk is the price of the stock, but we’re managing it with a stop-loss.

• Reward: Our initial target is $120, with potential for a run to the $130s and beyond.

🛑 Risk Management Tip

Set a stop-loss at $102 to protect your downside. This is below the recent support levels and would signal a potential failure of the breakout.

🚀 Catalysts on the Horizon

Keep your eyes on:

1. Q4 2025 Earnings (Jan 27, 2026): We expect to see continued margin improvement.

2. Freight Market Data: Look for continued strength in trucking and logistics data.

3. Analyst Upgrades: As the margin expansion story gains traction, we expect more analysts to turn bullish.

🧠 Final Thoughts

UPS is a classic breakout trade with a strong fundamental underpinning. The combination of a technical breakout, a compelling mean reversion story, and a clear strategic shift towards profitability makes this a high-conviction buy.

The market is sleeping on the impact of 280E elimination. While fundamentals have been tough, Green Thumb has proven its operational excellence. Now, with the tax burden lifting, their profitability is set to explode.

✅ Buy $UPS ( ▲ 0.22% )  at $108.5
💸 Sell the Feb 20th $100 put for $1.75

We'll be watching this one closely.

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