Paychex Is Toiling With Resistance; Time to Raise Sell Stops

 | Feb 17, 2017 | 9:43 AM EST
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Since July Paychex (PAYX) has struggled every time it got up to the $62 area. Buyers have been more aggressive, buying around $51 in May, and then $53 in November and $57 this month. The battle of bulls and bears continues. How will it turn out?
 
In this one-year daily chart of PAYX, below, we can see can see how the rallies into the $61 to $62 area have failed -- including the recent December and January period. Prices gaped lower earlier this month, and broke below the 50-day moving average line. Volume did increase on the rallies toward $62 in early July and November, but then volume "dried up" and the rallies fizzled.
 
 
When prices gaped down earlier this month, the volume increased -- a change -- and the On-Balance-Volume (OBV) line turned lower. A declining OBV line suggests that sellers have become more aggressive. The Moving Average Convergence Divergence (MACD) is below the zero line, but it looks like we could get a cover-shorts signal.
 
 
In this three-year weekly chart of PAYX, above, we can see that prices are above the rising, 40-week moving average line after a test. The weekly OBV line looks "neutral" for the past several months. The weekly MACD oscillator has crossed to a liquidate-longs sell signal.
 
Bottom line: PAYX could continue higher in the short run, but the chart resistance in the $60 to $62 area looks considerable. On the downside, a close below $57 would be a new low close -- and give us the simple definition of a downtrend. If you are long PAYX, I would suggest raising sell stops to a close below $57.

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