Procter & Gamble Reports in Overbought Territory

FILE - In this Aug. 4, 2009 file photo, the tower building at Procter & Gamble Co. headquarters in Cincinnati is shown. The Procter & Gamble Co. said Thursday, Oct. 29, 2009, profit dropped slightly in its first quarter, as consumers around the world kept tight reins on spending for such household items as laundry detergent and shavers.(AP Photo/Al Behrman)

The Procter & Gamble Company (PG) is a multi-national consumer goods company and a component of the Dow Jones Industrial Average. The company makes products for cleaning and personal care as well as foods, snacks and beverages. With a dividend yield of 3.59%, the stock is one of the “Dogs of the Dow” for 2018.

Procter & Gamble stock closed Friday at $80.58, down 12.3% year to date and in correction territory at 12.3% below its 2018 high of $91.92 set on Jan. 2. The stock set its 2018 low of $70.73 on May 2. The stock is underperforming the Dow 30, which is up 3% year to date and 4.4% below its all-time high of 26,618.71 set on Jan. 26. The average is up 9% from its April 2 low of 23,344.52.

Analysts expect P&G to post earnings per share of 90 cents when the company reports first quarter earnings before the open on July 31. Zacks Equity Research shows that the consumer staples giant has outpaced earnings estimates over the past 12 quarters while topping sales forecasts for the past four. However, the stock did not bottom until after its earnings report released on April 19. The low on May 2 was essentially caused by a rotation into the consumer staples sector, which is led by Procter & Gamble. Weak segments are expected to be Baby, Feminine and Family Care products, while the strong segments are deemed to be Skincare, Fabric and Home Care products. (See also: 8 Defensive Stocks Are Crushing the Techs.)

The daily chart for Procter & Gamble

Daily technical chart showing the performance of The Procter & Gamble Company (PG) stockCourtesy of MetaStock Xenith

Procter & Gamble is trading between its 50-day and 200-day simple moving averages at $76.98 and $82.14, respectively. The stock has been below my annual risky level of $99.08 all year long. The lowest horizontal level of $75.36 is my monthly value level at $75.36. The stock is below two horizontal lines, which are my quarterly and semiannual risky levels of $86.24 and $88.66, respectively.

[Check out Chapter 2 of the Technical Analysis course on the Investopedia Academy to learn more about using simple moving averages to develop your trading strategy.]

The weekly chart for Procter & Gamble

Weekly technical chart showing the performance of The Procter & Gamble Company (PG) stockCourtesy of MetaStock Xenith

The weekly chart for Procter & Gamble is positive but overbought, with the stock above its five-week modified moving average of $78.29. The stock is below its 200-week simple moving average at $83.68, which is “reversion to the mean” that failed to hold at $84.17 as the week of Feb. 9 began. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 84.20, up from 80.96 on July 20 and well above the overbought threshold of 80.00.  

Given these charts and analysis, my trading strategy is to buy P&G shares on weakness to my monthly value level of $75.36 and reduce holdings on strength to my quarterly and monthly risky levels of $86.24 and $86.24, respectively. (For more, see: Top 3 Mutual Fund Holders of Procter & Gamble Stock.)

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