Automatic Data Processing, Inc. provides business process outsourcing services worldwide. It operates through two segments, Employer Services and Professional Employer Organization (PEO) Services.
Take a look at the 1-year chart of Automatic (NASDAQ: ADP) below with my added notations:
ADP has formed key support at $155 (green) over the past two months. The stock is also declining against a down trending resistance line (red). These two levels combined have ADP stuck within a common chart pattern known as a descending triangle. Eventually, the stock will have to break one of those two levels.
The Tale of the Tape: ADP has formed a triangle pattern. A short trade could be made on a break of support or on a test of resistance. A long trade could be made at support or on a break through the triangle resistance.
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!
Christian Tharp, CMT