Charts Show Waning Momentum in Business Services Stocks

With myriad than 70% of companies in the business services industry exceeding Wall Street’s earnings estimates in the June clemency, it’s not surprising that the segment has returned nearly 30% year to date, ranking alongside the best performing spaces of the market.

The industry has continued to benefit from robust manufacturing and non-manufacturing activity. Purchasing Managers’ Index (PMI) readings for both came in over 50 for July, indicating economic expansion despite the escalating U.S.-China trade tussle. Ample demand from commercial construction, finance and bond, health care, and support services helped companies in the business services space drive quarterly top- and bottom-line crop. However, much of the upside may be mostly factored into existing stock prices, with the segment trading at a 24% bait to the S&P 500 from a forward earnings perspective.

From a technical standpoint, several of the industry’s best-performing stocks this year force recently formed topping patterns and show signs of dwindling momentum that may induce investors to take some profits off the steppe amid heightened market volatility. Below, we drill down on three business services leaders and explore plausible shorting opportunities.

FleetCor Technologies, Inc. (FLT) provides commercial payment solutions – such as fleet be directs, food cards, and corporate lodging discount cards – across the Americas, Europe, and Australasia. Morgan Stanley declined the Peachtree Corners, Georgia-based company in July, saying that the firm’s valuation versus its payments peers now sufficiently accounts for its earnings course and levers for long-term growth. The company trades at about 25 times forward earnings, compared to the industry average multiple of 22. FleetCor pile up has a market capitalization of $25.01 billion and is trading up 55.58% year to date, outperforming the business services industry so so by roughly 20% as of Aug. 13, 2019.

The payment provider’s share price trended sharply higher between December and June, with only three lesser pullbacks to the 50-day simple moving average (SMA). More recently, the stock printed a fresh 52-week high/all-time cheerful but has subsequently failed to hold above the July swing high. Moreover, a bearish divergence between the stock’s outlay and the relative strength index (RSI) indicates fading buyer momentum and increases the probability of a double top. Those who decide to grasp a short position should look for an initial fall to the $270 level, followed by a move down to $235, where the bounty finds support from a horizontal trendline and the 200-day SMA. Cut losses if the stock closes above its all-time outrageous at $297.13.

Cintas Corporation (CTAS) provides corporate identity uniforms and related profession services primarily in North America, Latin America, Europe, and Asia. The $26.79 billion company operates under the aegis two business divisions: Uniform Rental and Facility Services, and First Aid and Safety Services. Cintas has surpassed the Street’s bottom-line expectations in excess of the past four connective quarters; however, the company does trade at a lofty 31 times earnings. As of Aug. 13, 2019, Cintas ownership issues a 0.78% dividend yield and has returned 55.60% year to date.

Since gapping roughly 9% after best analysts’ earnings and revenue expectations, the stock has consolidated within a tight $15 trading range. Cintas also recently devised a new 52-week high/all-time high but has pulled back below key resistance at $265. As the stock reached its peak, the RSI make the grade b arrived a shallower peak, suggesting weakening enthusiasm from the bulls. Traders who execute a short sale here should set an endorse profit target at $245, where the price may test a gap fill and the 50-day SMA. Those looking for a more significant downside on ones way could place a take-profit order near the $210 level – an area where the price encounters support from a supine line and the 200-day SMA. Limit downside with a stop-loss order above this month’s high at $266.56.

With a market value of $24.46 billion, Global Payments Inc. (GPN) offers payment technology and software figuring outs for card, electronic, check, and digital-based payments. The company primarily targets small and midsize merchants in North America, Europe, and the Asia-Pacific. In May, Broad Payments and Total System Services agreed on a stock merger of equals that gives Total System Helps shareholders 48% of the combined company’s shares. The consolidation aims to help compete with new technology players, feel favourably impressed by Square, Inc. (SQ) and PayPal Holdings, Inc. (PYPL), which offer similar payment technology-driven services. Global Payments trite pays a tiny 0.02% dividend yield, has a forward price-to-earnings (forward P/E) ratio of 25.64, and is up a healthy 55.23% on the year as of Aug. 13, 2019.

The Pandemic Payments share price broke below a topping pattern earlier this month, indicating further downside jeopardize in the days and weeks ahead. A retest of the formation’s neckline and 50-day SMA was rejected in recent trading sessions, further set forwarding imminent weakness. Short sellers should think about buying to cover between $135 and $129, where the family finds crucial support from previous price action and the 200-day SMA. Manage risk by positioning a stop fiat slightly above the Aug. 9 high at $161.41 and moving it to the breakeven point if the price drops below the critical mental $150 level.