Companies that produce personal products have been showing relative strength over the last year, outperforming the S&P 500, and in some cases by big margins. Over the last year, the SPDR S&P 500 (NYSE:SPY) ETF is down 2.42% and has struggled to stay in positive territory since the August decline. Therefore, if you do find stocks that are still performing well in a tough overall market environment, they are likely to provide relative safety and also potentially outperform as the S&P 500 continues to battle its way out of negative returns.
Estee Lauder (NYSE:EL) is up 37.05% in the last year, to $110.50 from $79.13. The stock broke aggressively above $110 in November, and after making a 52-week high at $120.73, it has been moving between that high and $105. So far, $105 is holding as support, providing a potential buying opportunity, with a stop below $105 (close to 50-day moving average) or alternatively below $100 (close to 200-day moving average). Former resistance between $100 and $105 should now act as support, therefore, a move back below $100 is a warning signal. If the stock can move back above the 52-week high at $120.73, the target is $135. (For more, see Analyzing Chart Patterns.)
Kimberly Clark (NYSE:KMB) is up 13.05% over the last year, to $71.28, from $63.05. The stock made a 52-week high in October at $73.23 but quickly pulled back. Since then it has been moving between $72 and $67. A break out above $72 indicates the high will likely be tested. A breakout above the high provides a profit target of $78. If the stock continues to range, the stock can be purchased between $69 and $67 with a stop loss below $67. $67 should provide support, if it does not, it is a warning signal of further declines.
Colgate Palmolive (NYSE:CL) is up 14.67% over the last year, to $92.12, from $80.44. After making a September high at $94.89, the stock has been consolidating above $85 creating a downward sloping triangle. Buying along support of the triangle can provide a low risk entry point as a stop be placed around $85. The 200-day moving also provides support just above $85. If this level is broken though it indicates a downside break of the triangle and could mean significant declines. A move above $92 on the other hand breaks the triangle to the upside, providing a profit target of $100 to $101.
Procter Gamble (NYSE:PG) is just slightly positive for the year, but has been consolidating between a May high at $67.72 and a August low at $57.56. This has created a large triangle, the breakout of which could determine the longer-term direction of the stock. If the stock moves above $66, it indicates an upside breakout and re-test of the 52-week high at $67.72. If the high is exceeded, the profit target is $76. On the other hand, a drop below $61 breaks the pattern to the downside and indicates a further decline. On-balance volume has already broken to the upside and is in a strong uptrend - this is a positive indicator for the stock.
The Bottom Line
Personal product companies have been doing well relative to the market in this environment. As the S&P 500 remains negative for the year, these stocks have shown relative strength and provide some safety. That said, each stock has a support level which many do hold. A break of support means the stock could succumb to further declines. On the other hand, the strength these stocks have already shown means that if resistance is broken, there is still significant upside potential. (For more, see Technical Analysis: Introduction.)
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At the time of writing, Corey Mitchell did not own shares in any of the companies mentioned in this article.