PG Stock: All-Time Highs
Dividends are a compelling investment theme in a world where negative interest rates exist. Investors are continuously trying to reach for yield, and this tailwind has caused dividend stocks to be among the best-performing stocks. I was once someone who swore against them, as I thought they were boring and uneventful. Boy, was i wrong. Procter & Gamble Co (NYSE:PG) stock is a name I really like, and it’s not the three percent yield that has me watching this position at the current juncture.
I am quite enamored by the Procter & Gamble stock chart, as the price has just hit a key technical level. This key level will act to turn back PG stock, or it will give way and PG stock can surge to a new all-time high. It is the prospect of new all-time highs that has me drawn to this name. If you have read any of my previous opinions, you will understand the love and admiration I have for such a feat.
I consider myself a “chartist,” meaning I like to paint pictures on charts using trend lines. Trend lines are by far my favorite and most important tool. The uptrend on the chart above represents the short-term bull market in PG stock that developed after shares bottomed in August 2015. This uptrend is created by connecting the valleys on the price chart. An uptrend can be easily identified, as the price moves from the lower left to the upper right of the chart.
The following chart illustrates the current trend in Procter & Gamble stock.
Chart courtesy of StockCharts.com
This trend line has served investors well, as PG stock has returned 39% since the share price bottomed in February 2015. The key takeaway from the chart above is that, as long as Procter & Gamble stock trades above this trend line, my bias will remain bullish.
The following PG stock chart illustrates the key technical level I was referring to.
Chart courtesy of StockCharts.com
PG stock is approaching a previous level of price resistance that was effective in turning the bulls away in December 2014. Shares sold off quite dramatically the first time this level was hit. The $89.00 price marks this key level of resistance and is highlighted on the chart with a blue horizontal line.
The indicator in the lower panel labeled “MACD” serves as a momentum indicator. Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator, Signal line crossings are used to distinguish between bullish and bearish signals. This signal is produced on a monthly scale and serves to smooth out the signal and helps define the longer-term trend. In March, this signal crossed in a bullish manner, indicating that the bullish momentum is outpacing bearish momentum, and that the bulls are in full control.
The price is currently sitting at resistance, and I do not expect this level of resistance to be broken on the first attempt. When the share price finally gathers enough momentum to break out above this resistance level, it would mark a new all-time high for Procter & Gamble stock. New all-time highs are indeed a special event. Investors who are long are all sitting in profit territory, and all of the short sellers are sitting with losses. These short sellers must cover their position at some point or the losses will continue to mount. This event is known as a short covering rally and it helps to further fuel the rally. It is not uncommon for such events to push shares higher than many would have speculated.
The Bottom Line on Procter & Gamble Stock
I am bullish on PG stock, but I do not expect the level marked as resistance to be penetrated on the first attempt. I expect some sort of consolidation before a new all-time high is forged, at which point my bias will become extremely bullish on Procter & Gamble stock.