During Thursday night's Mad Money program Jim Cramer told viewers how he was viewing this week. Cramer pointed out that on Tuesday, we'll get earnings from small business payroll processor Paychex Inc. (PAYX) and he said it's possible the company is doing better than expected as the economy bounces back.
Let's check out the charts of PAYX.
In the daily bar chart of PAYX, below, we can see that prices spent much of June between the rising 50-day moving average line and the declining 200-day moving average line. The trading volume has been active in recent months telling us that traders and investors are interested in the stock and the rally is not just from short-covering.
The daily On-Balance-Volume (OBV) line bottomed in March/April and has moved up with the price action. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line and is now curving upward to a fresh buy signal.
In the weekly bar chart of PAYX, below, we can see that so far prices have met some selling resistance at the declining 40-week moving average line.
With the weekly OBV line rising and the MACD oscillator in a cover shorts buy signal, I suspect PAYX will be able to break above the 40-week moving average line in short order.
In the weekly close-only Point and Figure chart of PAYX, below, we can see a potential upside price target in the $112 area.
Bottom-line strategy: Traders could go long PAYX at current levels risking a close below $70. Add on strength above $81 and look for gains to $100 and then the $112 area.