Hi everyone! Today I’ll be looking at a consumer goods company:
Proctor & Gamble Company (NYSE: PG)
On the weekly chart, note that the stock has generally been forming a series of higher highs and higher lows, suggesting a healthy uptrend is in place. The stock has recently been consolidating in what appears to be a symmetrical triangle pattern before breaking out of it over the past month or so. Referencing the pre-COVID high of 128.09 as the swing high and the 2018 low of 70.73 as the swing low, I note that PG hit its 1.618 Fib extension at 163.54 in 2021, before undergoing a several-year-long correction pattern.
A breakout of the symmetrical triangle pattern suggests a minimum retest of prior ATHs at 165.35 (also note they overcut the 1.618 Fib extension, which is a common occurrence to trap bulls at highs).
More recently, PG has been trading in a potential short-term rising wedge pattern with higher highs and higher lows. Note that a bearish divergence pattern may be forming on RSI, while holding a series of higher lows. From the looks of it, PG could move back towards the 165.35 level and put a marginally higher high before heading back to 155.49, which is a fairly strong support level, to base and backtest its breakout. I’m expecting confluence to show up where the steepening ascending trendline (orange) and the symmetrical triangle descending trendline (red) converge. Note that the ghost candle pattern above is just meant to give an idea of how the stock might move over the next 1-2 months, and is not meant to be an accurate representation of the actual price movement (psst… no one can predict the future).
However, in the event that PG holds this 163.54 level firmly, then it is also possible for PG to simply push towards its next Fib extension, namely the 2.618 extension at 220.90 (not pictured). There is no divergence on the weekly or monthly charts, suggesting that the bearish divergence might be short lived and the overall trend is still up.
Again, note that the 155.49 retest is ideal but not gospel. If bulls can sustain their momentum, then we may not have a backtest, period.
There’s also a possibility that the backtest isn’t perfect and we head lower. So far, bulls have done well to hold the 148-152 gap, so there’s a likelihood this might be a runaway bullish island gap, similar to SPY several months ago.
Sentiment: BUY
Summary (with Price Targets - NFA):
Broke out of symmetrical triangle consolidation and is headed to the 1.618 Fib extension at 163.54, likely to make a new high above 165.35 (prior ATHs). Once we turn the prior ATH level into support, the stock is going to head towards the 2.618 Fib extension at 220.90. Otherwise, if we reject here, then we are headed back to 155.49 and lower.
Investors can accumulate at current levels down to 155.49, with risk down to the 148.21 level for gap fill. Honestly, as long as we continue to make higher lows, the bigger picture suggests that PG will continue to head higher in the longer term.
All right, that’s all for this newsletter. Until next time!
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