Mucci said despite the pandemic, things are beginning to look brighter for Paychex. He said after a big drop in revenue last April, there's been steady downward pressure, but this quarter, earnings per share was up 4%.
Cramer said every time shares of Paychex sell off, it's been a buying opportunity. Let's check the charts to see where and when this buying opportunity could develop.
We last looked at PAYX on December 21 ahead of earnings and wrote, "However, prices made a new high for the move up last week but a quick reversal of those gains and weakness below $92 could mean we made a bull trap. Stay nimble."
In this daily bar chart of PAYX, below, we can see that prices have weakened since the earnings report last month. PAYX just closed below the rising 50-day moving average line. The slope of the 200-day moving average line turned positive last month. The trading volume was heavier into last month's peak suggesting more aggressive selling into strength.
The On-Balance-Volume (OBV) line has turned lower telling us that sellers of PAYX are now more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator has been weakening since the middle of November and is now close to the zero line telling us that there is little in the way of "trend strength".
In this weekly Japanese candlestick chart of PAYX, below, we can see a bearish candlestick pattern in December followed by confirmation. Can you see the large upper shadow? A top is in, for now, but the candles do not give us a price target. PAYX is still above the rising 40-week moving average line.
The weekly OBV line turned down last month and the MACD oscillator has narrowed and could soon cross to the downside.
In this daily Point and Figure chart of PAYX, below, we can see a potential downside price target in the $80 area. This target price could get overrun if the broad market remains weak for several weeks.
Bottom line strategy: PAYX has turned lower and could decline to the $80 area for starters. The longer-term trend is positive so this anticipated decline could become a buying opportunity. Keep your powder dry for now.