Procter & Gamble (PG) Tests Resistance After Strong Quarter

Dow component The Procter & Gamble Company (PG) is trading higher by about 1% in Wednesday's pre-market session after handily beating second quarter 2021 estimates and raising fiscal year revenue guidance. The household goods giant booked a profit of $1.64 per share during the quarter, $0.13 better than expectations, while revenue rose a healthy 8.3% year over year to $19.25 billion, more than $500 million above consensus.

The stock broke out to a new high in July, with strong revenue growth powered by socially distanced customers stocking their shelves with non-durable goods. The company's reputation as a safe haven attracted buyers as well, at least until November, when investors started to dump these issues and buy beaten-down recovery plays. Limited upside this morning suggests that the group is still out of favor, given exceptionally strong quarterly metrics.

Wall Street consensus on P&G stock stands at a "Moderate Buy" based upon eight "Buy" and four "Hold" recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $130 to a Street-high $169, while the stock will open the session more than $30 below the median $157 target. Weak sentiment is weighing on this poor placement, but defensive buying interest could return later this year.

Procter & Gamble Monthly Chart (2007 – 2021)

A multi-year recovery wave reached the 2007 high at $75.18 in 2013, triggering an immediate breakout that settled into a trading range between support at that level and resistance in the mid-$80s. An October 2014 rally to new highs failed in the first quarter of 2015, triggering a steep slide to a three-year low during the summer's mini "flash crash." The stock returned to resistance in the fourth quarter of 2016 but failed to break out after the presidential election.

A persistent decline starting in January 2018 carved the second higher low since 2012 in May, setting the stage for a powerful rally impulse that mounted 2015 resistance in January 2019. The stock posted exceptionally strong returns through the rest of the year and into February 2020, topping out at $128 and rolling over in a vertical downdraft that posted the third higher low in eight years in March.

A bounce into July completed a round trip into the February peak, setting off an immediate breakout that topped out in the mid-$140s in October. A November rally attempt failed, while downside into January 2021 completed a shallow double top breakdown when it undercut range support at $134.68. The stock is testing new resistance on Wednesday, with an opportunity to remount that level and improve the intermediate technical outlook.

The on-balance volume (OBV) accumulation-distribution indicator hit a new high in November and has now fallen to a four-month low. Unfortunately, both weekly and monthly stochastic oscillators have crossed into active sell cycles, raising the odds that bears will prevail right here despite strong quarterly results, potentially confirming a double top breakdown that exposes additional downside into July support near $128.

The Bottom Line

Procter & Gamble stock is trading higher after a strong quarter, but growing technical headwinds suggest that the uptick will be short-lived. 

Disclosure: The author held no positions in the aforementioned securities at the time of publication.