While traders panicked over Trump’s tariff threats Friday, I was hunting for the setup everyone missed: ADP’s perfect technical breakdown.
Friday’s 600-point Dow drop had everyone screaming about China tariffs and trade wars.
The Nasdaq hit new highs, then boom – down 2% in hours. Tech stocks got hammered because of China exposure. Classic market chaos.
But here’s what caught my attention while everyone else was reading headlines: ADP has been quietly setting up one of the cleanest short patterns I’ve seen all month. This thing’s been begging to fall for weeks.
Four Squeezes Pointing Down
When I say ADP has “four squeezes” stacked from the daily down to the 10-minute charts, picture this: imagine compressing a spring. The tighter you squeeze it, the more energy builds up. When it finally releases, the move is explosive.
That’s exactly what happens with stock volatility. When a stock goes sideways and stops moving, volatility contracts like a compressed spring. The longer it stays compressed, the bigger the eventual breakout.
ADP has this spring-loading effect happening on four different timeframes simultaneously. Daily chart squeeze, 60-minute squeeze, 30-minute squeeze, 10-minute squeeze. They’re all compressed, and they’re all pointing the same direction: down.
Think of it like having four springs stacked together, all ready to push this stock lower. When multiple timeframes align like this, the resulting move can be significant.
Relative Weakness Tells the Story
Here’s what really gets me excited about this setup: ADP is down on the year while the S&P is up double digits. That’s textbook relative weakness.
Relative weakness means exactly what it sounds like – the stock is weak compared to the broader market. While most stocks are making money for investors, ADP is losing money. That’s institutions quietly rotating out of a name they don’t want to own.
When markets get volatile, the relatively weak stocks get hit first and hardest. ADP’s been swimming naked for months. Now the tide’s going out.
Bearish Stacked EMAs Create Resistance
The technical damage in ADP runs deep. The exponential moving averages are stacked bearish, meaning the shorter-term trend lines sit below the longer-term ones, all pointing downward.
Picture a stack of pancakes tilted downward.
The 20-day EMA sits below the 50-day, which sits below the 100-day, which sits below the 200-day. Every timeframe shows a downtrend.
This creates a wall of resistance above current prices.
Even if ADP bounces, those moving averages will cap any rally. The stock can’t even reclaim its trend lines. Once you get this kind of technical damage, it takes months to repair – not weeks.
Why the Setup Makes Sense
ADP’s core business is processing payrolls.
September’s private payroll report showed 32,000 jobs lost versus 51,000 expected gains. When companies aren’t hiring, they don’t need ADP’s services.
The government shutdown hitting day 10 doesn’t help either. ADP serves government contractors who aren’t getting paid. Small businesses – ADP’s bread and butter – will delay HR tech spending when trade wars heat up.
But honestly?
I don’t need the fundamental story.
The chart’s been screaming weakness for months. Those death crosses in July, the failed bounces, the inability to break resistance – this breakdown’s been building.
Your Action Plan
With those stacked EMAs acting as resistance and four squeezes pointing down, any rally should be short-lived.
This sets up for a potential play using put options.
The risk is obvious – Trump could make peace with China tomorrow, jobs data could surprise higher, and market sentiment could flip overnight.
That’s why position sizing matters.
But when technical weakness, fundamental headwinds, and shifting market sentiment align like this? These setups can move fast.
The stars are lining up for ADP to break lower. Sometimes the best opportunities hide behind the biggest headlines.
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