Annaly Capital Management (NLY Quote - Cramer on NLY - Stock Picks) plunged from $21.20 to $11.50 in just three weeks before bouncing with the broad market in March. Price then jumped quickly back to $17.52 and ground sideways in a choppy pattern before topping out in May just 51 cents above the late-March peak.
The stock broke two-month support earlier this month and has been pulling back to test resistance for the last two weeks. It's made little progress, while selling pressure under the surface has picked up. This is the perfect prescription for a follow-through selloff that drops the stock through the swing lows at $15.25 and into a test of first-quarter support.
Automatic Data Processing (ADP Quote - Cramer on ADP - Stock Picks) rallied to a recovery high at $49.81 in October and dropped 12 points into the January low. It then bounced weakly and tested that level for the next two months before embarking on a stronger recovery attempt. That uptrend stalled in early April at 50- and 200-day moving average resistance.
The stock has been moving sideways since that time in a head-and-shoulders topping pattern that will complete when price finally drops into the neckline, currently at $41.50. A break at that support level should trigger a substantial selloff that eventually tests first-quarter support in the mid-$30s.
Alan Farley
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