Automatic Data Processing (NASDAQ: ADP)

Automatic Data Processing, Inc., together with its subsidiaries, provides business process outsourcing services worldwide. The Employer Services segment offers a range of business outsourcing and technology-enabled human capital management (HCM) solutions, including payroll services, benefits administration services, talent management, human resources management solutions, time and attendance management solutions, insurance services, retirement services, and tax and compliance solutions. The PEO Services segment provides a human resources (HR) outsourcing solution through a co-employment model to small and mid-sized businesses.

Take a look at the 1-year chart of Automatic (NASDAQ: ADP) below with added notations:

1-year chart of Automatic (NASDAQ: ADP)

After its nice November-December rally, ADP moved into a small, sideways trading range. While in the range, the stock has formed a key resistance level at $104 (red), and a clear $102 support (green). At some point the stock will have to break one of the two levels.


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The Tale of the Tape: ADP is trading within a small range. The possible long positions on the stock would be either on a pullback to $102 or on a breakout above $104. The ideal short opportunity would be on a break below $102.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach