ADP Stock Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. Automatic Data Processing, ADP stock, is in focus today…

This journal entry looks at the recent market movements of ADP. NASDAQ: ADP

VantagePoint Trading Journal ADP Stock

A few big investment firms weighed in on the future for U.S. equities over the President’s Day weekend. BlackRock upgraded its outlook for U.S. stocks on earnings momentum, Citi said there was “no equity bear market, but more corrections may be in sight,” and Morgan Stanley stated the recent share slide was the “appetizer, not the main course.”

Thanks to the tools we have with VantagePoint, we can let the software (and not the investment firms) do the forecasting for us. We can use the artificial intelligence forecasting software to analyze markets at all levels. Whether you are looking for individual stocks, futures or ETFs, stock sector rotations, or broad indexes like the S&P, Dow, and the Russell, VantagePoint can easily compile that data. A compelling indication of upside or downside momentum is something that I would take seriously on a trading day like today.  Let’s take a look at Automatic Data Processing (NASDAQ: ADP).

image of ADP stock trading diary with VantagePoint
VantagePoint recently indicated a potential upside breakout in ADP due to a bullish crossover on 2/15/18.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black, simple 10-day moving average on 2/15/18. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position a full three trading days before back on 2/12/18. This indicator measures strength and weakness for a 48-hour period. The move to the GREEN position indicates strength and further makes the case for a potential bullish scenario. That’s why one could consider entertaining a setup to the upside.

Strategy Discussion

If one were a straight stock trader, simply buying ADP stock in the $116.25 area could prove to be prudent. You are anticipating a move to the upside. It’s also a conservative way to enter ADP without the limitation of time associated with other strategies. It would also be good practice to place a sell-stop order in the $110.00 area to mitigate potential losses.

For more active traders, consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

The purchase of a debit call spread may be one way to approach this situation. The first thing you want to determine is your target price. To do this, you need the current price, expiration date and at-the-money volatility for that timeframe. This calculation yields a target price of approximately $121.00. One could consider the potential opportunity of the regular March monthly expiration 119/121 call vertical paying $0.35.  This has a maximum risk of what you paid for the spread or $0.35.  The maximum reward is the width of the spread less any premium paid or $2.00 – $0.35 = $1.65.  This gives us a reward to risk ratio of 4.71:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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