For his "Executive Decision" segment of "Mad Money" Tuesday night, our own Jim Cramer spoke with Marty Mucci, president and CEO of Paychex (PAYX) .
PAYX reported strong earnings on Tuesday. As far as the fundamentals went, Mucci said Paychex had a solid quarter with earnings that rose 16% and was driven by products that provide HR services for small and mid-size businesses.
Fundamentals are good and certainly useful but they don't give investors and traders the whole story. Let's check out the charts and indicators.
In this daily bar chart of PAYX, below, we can see a low in late March and a retest in late April before PAYX rallied sharply into September. A bullish golden cross of the 50-day moving average line and the 200-day line can be seen in late June. PAYX is above the rising 50-day line and the bullish 200-day average.
The daily On-Balance-Volume (OBV) line rises with the price action from late April but has "leveled off" in September even though prices have continued higher. This difference in direction is a bearish divergence but it might just be temporary.
Another bearish divergence can be seen in the weakening price momentum study from August into September. Prices are going up but at a slower pace.
In this weekly bar chart of PAYX, below, we can see a rally over the past three years. Prices have crossed above and below the 40-week moving average line but a pattern of higher lows and higher highs is still clearly visible.
The weekly OBV line is mostly neutral until August of 2017 when it starts to move higher and signals more aggressive buying. The weekly OBV line made a new high last month to confirm the new price high.
In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator which is well above the zero line but has begun to narrow towards a possible take profits sell signal.
In this Point and Figure chart of PAYX, below, we can see a potential upside price target of $90.66 being projected. A decline to $72.27 could weaken the chart.
Bottom line strategy: We have a balancing act - the daily chart is showing a couple of bearish divergences from the OBV line and momentum, but we have a $90 price target on the Point and Figure chart. Conclusion - stay long but use a sell stop at $71.
