PAYC Stock: The Path of Least Resistance
Paycom Software Inc (NYSE:PAYC) stock has been a stellar performer since it went public in April 2014. This cloud-based human capital management software provider has returned an impressive 271.6% return since inception, and I am focusing on Paycom stock because I have reasons to believe that higher PAYC stock prices are on the horizon.
My bullish beliefs are centered around technical analysis, which has become my preferred method of analyzing potential investments. This method is predicated on the notion that historical price and volume data can be used to discern trends
and forecast future prices. I have been refining my skills in this craft for nearly two decades, and my proficiency in this style of analysis, which was attained through passion and dedication, is now at a level at which it has translated into many successes.
When I look for a potential investment, I am on the lookout for particular price patterns that are supported by complimentary indicators. This confluence of information is then used to create a single premise, which can then be used to create an applicable trading strategy.
The following Paycom stock chart illustrates the price pattern and supporting indicator that piqued my interest in this investment.
The price chart illustrates a bullish trend that has been contained within a large ascending channel. An ascending channel is a technical price pattern that contains two parallel upward-sloping trend lines that define upper resistance and lower support. As long as the price continues to oscillate within the confines of this price pattern, the bullish trend is intact and sustainable.
Support outlined by an ascending channel was tested in February 2016, and a rally has since ensued. The logical objective of this rally is for the price to test the level of resistance that is outlined by the ascending channel. The longer it takes to achieve this objective, the higher the target becomes. This is due to the nature of the upward-sloping resistance level that continues to rise as time progresses.
Chart courtesy of StockCharts.com
The moving average convergence/divergence (MACD) indicator located in the lower panel of the above chart confirms the view that the price is set to continue its advance. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crosses to distinguish between bullish and bearish momentum. A bullish cross suggests that the bullish momentum is propelling the price and, as a result, the path of least resistance is tilted toward higher prices.
This indicator has done extremely well in confirming the trend within the confines of the ascending channel.
In March 2016, a bullish cross was generated and PAYC stock proceeded to advance in an orderly manner. Another bullish cross was just generated in February of this year, and a similar advance is now expected.
This indicator reinforces the view that higher prices are expected, and that the level of resistance outlined by the ascending channel will be tested.
The following Paycom stock chart illustrates the price action on the daily chart that adds further credence to the notion of higher stock prices.
Chart courtesy of StockCharts.com
The Paycom stock chart above is an illustration of bullish constructive price action. Bullish constructive price action consists of impulse waves that advance the price, and consolidation waves that serve to unwind overbought conditions and set up the next impulse wave. This alternating wave structure allows a trend to remain sustainable.
On the price chart above, the impulse wave is highlighted in green, and the consolidation wave is highlighted in purple. The price of PAYC shares has just exited the consolidation pattern in an upward direction, indicating that a breakout has just occurred. This breakout is now suggesting that a new impulse wave is in development.
The indicator that is generated by the moving average crosses supports the view that PAYC stock will continue to appreciate. A bullish golden cross was generated in May 2016. This signal is produced when the 50-day moving average, highlighted in blue, crosses above the 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is in development.
This indicator was in jeopardy, and a death cross was on the verge of generation, but the price wisely accelerated higher and the death cross was averted. It takes a lot of buying pressure to avert a bearish signal, and the actual ability to avert this signal indicates that the bullish momentum propelling this stock is excessively strong, and it supports the view that higher prices are likely.
Bottom Line on Paycom Stock
I am bullish on Paycom stock because of the indications that I have garnered off the PAYC stock chart are suggesting that higher stock prices are likely. My bullish view will remain as long as the indicators and price action on the stock chart continue to support this view.