Robert Moreno is a regular contributor on Real Money Pro. Click here to learn about this dynamic market information service for active traders.
Paychex (PAYX), the payroll outsourcing company, is breaking out of the horizontal channel it has been trading in for most of the year, and could be in the early stages of an intermediate-term uptrend.
The daily chart shows a sharp drop in the stock price in January and the consolidation that followed above $45.50 level support, and below resistance supplied by the 200-day moving average and the 62% retracement level of the 2016 range. Moving average convergence/divergence has made a bullish crossover and is tracking steadily higher, while the relative strength index has crossed above its signal average and centerline. These readings reflect an increase in positive price momentum. The aroon indicator is designed to identify early changes in the direction of a trend, and it has made a positive green line crossover, suggesting the start of a new uptrend.
Chaikin money flow turned into positive territory this month, reflecting renewed buying interest in the stock, and the money flow index, a volume-weighted relative strength measure, is above its centerline, indicating positive money flow momentum.
Paychex closed above both the 200-day moving average and the 62% retracement level on Friday and is bumping up against the 50-day average in today's session. The stock is a buy at its current level, using a position size that accommodates an initial percentage stop under the $47 level.