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Chart Advisor: Procter & Gamble Breaking Out

Chart Advisor: Procter & Gamble Breaking Out

Posted May 14, 2024 at 8:09 am
Investopedia

By Foram Chheda, CMT

1/ A Hint of a Defensive Play; A Breakout in Consumer Staples (XLP)

2/ Improving Relative Strength and Momentum of Procter & Gamble (PG)

3/ Price Breakout from an Ascending Triangle in PG

4/ What to Expect Next from PG?

Investopedia is partnering with CMT Association on this newsletter.  The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.

1/

A Hint of a Defensive Play; A Breakout in Consumer Staples (XLP)

Courtesy of StockCharts.com

The current market sentiment suggests a potential shift towards a risk-off environment or a more cautious and defensive approach. This sentiment is evident in the performance of sectors such as Utilities, Consumer Staples, and Consumer Discretionary, which are showing signs of strength. Specifically, the Consumer Staples Select Sector SPDR Fund (XLP) has recently gained momentum. After breaking out of a falling channel and retesting support, it appears to be resuming its upward trajectory.

Contrarily, the Energy sector, as represented by the Energy Select Sector SPDR Fund (XLE), has experienced a decline since encountering resistance around $75.30 in April 2022. This decline has formed a distinct falling channel, with the ETF frequently oscillating near key moving averages such as the 50-week, 100-week, and 200-week moving averages. However, following a consolidation phase near $64.75, the ETF has exhibited a reversal in trend. It has steadily climbed higher, surpassing significant moving averages, indicative of a bullish shift.

Notably, the recent breakout from the established falling channel suggests fresh investment opportunities within this sector. Given the prolonged duration of movement within the channel, spanning over two years, this breakout heralds the potential for upside in this sector.

2/

Improving Relative Strength and Momentum of Procter & Gamble (PG)

Courtesy of StockCharts.com

Sector Rotation Analysis aims to correlate the current strengths and weaknesses observed in the stock market with the general business cycle, using the relative performance of benchmark indices as a reference. The Energy Select Sector SPDR Fund (XLE) is positioned within the improving quadrant of the Relative Rotation Graph (RRG) when compared to the broader S&P 500 Index, indicating potential strength relative to the benchmark. Additionally, Procter & Gamble (PG), a constituent of XLE, demonstrates strength on the charts, residing within the improving quadrant of the RRG as well. Stocks or indices situated within the improving quadrant are anticipated to sustain or enhance their relative performance against the benchmark index.

3/

Price Breakout from an Ascending Triangle in PG

Courtesy of StockCharts.com

The price action observed in Procter & Gamble (PG) over the past 24 months has resulted in the formation of an Ascending Triangle pattern. Notably, Ascending Triangles are regarded as bullish technical formations, typically leading to a bullish breakout and upward price movement, regardless of where they are formed. PG recently broke out from this bullish pattern in January of this year, subsequently experiencing upward momentum, retracing to retest support, and now displaying signs of resuming its ascent. The breakout of PG from this established pattern, coupled with the attainment of a 52-week high, presents a bullish technical setup, suggesting potential investment opportunities.

4/

What to Expect Next from PG?

The current technical setup suggests favorable price measurements for Procter & Gamble (PG). While some period of range-bound consolidation in the stock may occur in the immediate short-term, it remains conceivable that if the stock maintains its position above the 150-155 range, there exists the potential for upward movement, possibly testing levels around 190-195 in the weeks ahead. However, it is important to note that a close below the 150 mark would invalidate this technical configuration, indicating a potential shift in sentiment and altering the projected trajectory for PG.

Originally poster 14th May 2024

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