Paychex, Inc. (PAYX) has been hesitating around its January high the past two months. It is hard to decide if patient longs from December and January are "getting even" or whether PAYX has the right stuff to power to new highs. A closer look at the charts and indicators might give us an insight to a profitable strategy going forward. Let's check.
(For more on PAYX, see: When Sellers Walk Away: Cramer's 'Mad Money' Recap.)
In this updated daily bar chart of PAYX, below, we can see that prices are testing and perhaps breaking the rising 50-day moving average line. Moving averages are just trend following tools and they do not lead. The slope of the 50-day line is still positive but a turn to a negative slope would be a real negative. The 200-day moving average line is still rising and intersects down around $66.
The daily On-Balance-Volume (OBV) line is a way to judge who in the marketplace is being more aggressive - buyers or sellers. Buyers of PAYX were more aggressive in May and June but their resolve weakened in July.
The Moving Average Convergence Divergence (MACD) oscillator shows a bearish divergence when compared to the June and July price action. Prices made higher highs in June and July but the MACD oscillator made a lower high and a take profits sell signal.
In this weekly bar chart of PAYX, below, we see a mixed picture when it comes to indicators. Prices are above the rising 40-week moving average line but the slope of the line looks to be flattening.
The weekly OBV line made a slight new high and the weekly MACD oscillator is narrowing towards a take profits sell signal from a lower high than in January.
In this Point and Figure chart of PAYX, below, we can see two clear highs at $71. A breakout at $72 would be positive and could open the way to a $95 price target.
Bottom line: PAYX has retreated recently playing chicken with a bullish breakout on our Point and Figure chart (above). A deeper retreat to around $66 looks like the short-term path of prices for now but a close above $72 could develop in the months ahead. If you are long you should protect your position. If you have no position I would be patient for now.