Paychex, Inc. (PAYX) is a leading payroll processing, human resources and benefits outsourcing provider for companies of all sizes. This company should benefit from a growing economy and changing human resources issues such as healthcare and tax reform. The company is due to report results before the opening bell on Monday, March 26.
The stock closed Thursday, March 22, at $63.49, down 6.7% year to date and in correction territory at 13.1% below its Jan. 23 high of $73.10. The stock is up just 2.7% from its 2018 low of $61.80 set on Feb. 8.
Analysts expect Paychex to report earnings per share of 61 cents when it releases results on Monday. The company has reported better-than-expected earnings in three of the past four quarters. In an expanding economy, Paychex should be adding new clients, particularly given the changing rules in human resource activities. Zacks Equity Research indicates that Paychex solutions were adopted by the International Franchise Association for its membership. (See also: Trump 'Very Serious' About 'Phase 2' of Tax Cuts.)
The daily chart for Paychex
Paychex has been above a "golden cross" since Oct. 23, 2017, when the stock closed at $64.34. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving and indicates that higher prices lie ahead, and this had been the case for shares of Paychex until recently. The spike to its all-time high of $73.10 was fueled by a story that M&T Bank Corporation (MTB) was going to purchase Paychex, which quickly denied this possibility. The horizontal line at the top of the chart at $70.29 is this month's risky level. The level of $68.05 is my quarterly pivot. My annual pivot of $65.75 failed to hold on Thursday.
The weekly chart for Paychex
The weekly chart for Paychex is negative, with the stock below its five-week modified moving average of $65.75 but above its 200-week simple moving average of $53.96, which is the "reversion to the mean," last tested during the week of Dec. 23, 2011, when the average was $29.33. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 35.15, down from 36.85 on March 16.
Given these charts and analysis, investors should buy Paychex shares on weakness to its 200-day simple moving average of $62.63 and rising each week. Investors should sell strength to my quarterly and monthly risky levels of $68.05 and $70.29, respectively. My annual and semiannual pivots are $65.75 and $65.80, respectively. (For more, see: ADP vs. Paychex: Which Is Better for My Portfolio?)