Extreme volatility has dominated financial markets around the globe over the past several weeks. As investors and long-term traders look to safe havens to store their capital during these difficult times, one segment that looks particularity promising includes the companies that have been raising dividends over time. Perhaps due to strong market positions, scale of operations, and other competitive advantages, long-term charts for these companies suggest that this group could be one of the few poised to make gains over the months ahead.
Vanguard Dividend Appreciation ETF (VIG)
Active traders often turn to exchange-traded products such as the Vanguard Dividend Appreciation ETF (VIG) when looking to get a sense of where niche segments such as those companies with a track record of rising dividends are headed. As you can see from the 10-year weekly chart below, the fund has been trading within a defined channel pattern, and the recent close near the lower trendline suggests that the long-term uptrend is intact.
While the sharp sell-off did briefly send the price below the support levels, which is a signal often used to mark a trend reversal, the stock bounced sharply after panic selling sent prices to oversold readings on the relative strength indicator (RSI), which suggests instead that the bulls are still in control of the momentum. Traders will likely maintain a bullish outlook on the Vanguard Dividend Appreciation ETF until the price notches several consecutive closes below the lower trendline or the 200-week moving average (red line).
The Procter & Gamble Company (PG)
One of the top holdings of the VIG ETF that has leading positions in many consumer brands and will likely capture the attention of active traders over the weeks ahead is The Procter & Gamble Company (PG). As you can see from the weekly chart below, the company's stock is trading within an extremely strong upward trend, as shown by the dotted trendlines.
As discussed in the case of VIG above, the recent move toward the long-term support of the 200-week moving average and major trendlines suggests that the bulls are in control of the long-term trend. Bullish traders will most likely look to buy as close to the support levels as possible to maximize the risk/reward of the setup. Stop-loss orders will most likely be placed below one of the dotted trendlines or the 200-week moving average, depending on risk tolerance and investment horizon.
Walmart Inc. (WMT)
Walmart Inc. (WMT) has been one of the retail leaders during the pandemic and has taken quick steps to make changes that prioritize the safety of both customers and staff. Taking a look at the weekly chart below, you can see that the price of the company's shares have been trading within an extremely strong uptrend, and Tuesday's gain sent the price above a key level of resistance, which suggests that prices could be poised to make a run higher. Based on the height of the short-term pattern, active trader will most likely set near-term targets near $150, which is equal to the entry point plus the height of the pattern.
The Bottom Line
Companies that have shown a strong tendency to raise dividends over time have proven to be one of the groups to watch in recent weeks. Long-term trendlines and major moving averages are providing followers of technical analysis with clear buy and sell signals, and the charts clearly suggest that the primary trend will remain in favor of the bulls.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.