The Procter & Gamble Company (PG) is a consumer staples giant and a component of the Dow Jones Industrial Average. Go to the supermarket, and you will find P&G's beauty, grooming, health care, personal hygiene and infant care products as you shop the aisles.
The company is the largest holding of the Consumer Staples Select Sector SPDR Fund (XLP) with a weighting of 15.12%. The stock has an elevated P/E ratio of 24.61 and a reasonable dividend yield of 2.81%, according to Macrotrends.
Procter & Gamble shares closed Thursday, April 18, at $106.05, up 15.4% so far in 2019. The stock is setting a new all-time intraday high almost every day, including today, with a morning high of $107.20, which is a test of its monthly risky level of $106.77. The stock is in bull market territory at 49.9% above its 2018 low of $70.73 set on May 2.
Meanwhile, XLP closed last Thursday at $56.87, up 12% year to date, with the ETF setting an all-time intraday high of $58.95 on Jan. 29, 2018. The ETF set its 2018 low of $48.33 on Dec. 26 and is 17.7% above this level. Clearly, P&G stock has been the better performer.
Analysts expect P&G to report earnings per share (EPS) of $1.06 when it releases fourth quarter results before the opening bell on Tuesday, April 23. The company has a string of beating EPS estimates over the past 15 quarters. Wall Street expects solid consumer spending on soaps and cleaning materials, and organic sales growth is expected to continue expand at 4%. The negative wildcards could come from overseas markets with struggling local economies and weak currencies.
The daily chart for Procter & Gamble
Procter & Gamble stock has been trading above a "golden cross" since Sept. 12, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices were ahead. Investors could have bought the stock at its 200-day simple moving average at $80.35 on Oct. 11.
The close of $91.92 on Dec. 31 was an important input into my proprietary analytics and resulted in a semiannual value level at $79.43 and an annual pivot at $101.52. The close of $104.05 on March 29 was another important input into my analytics and resulted in a monthly risky level at $106.77 and a quarterly value level at $90.28.
The weekly chart for Procter & Gamble
The weekly chart for Procter & Gamble is positive but extremely overbought, with the stock its five-week modified moving average at $103.19. The stock is above its 200-week simple moving average, or "reversion to the mean," at $85.16. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 95.58, well above 90.00 as an "inflating parabolic bubble."
Trading Strategy: Buy Procter & Gamble shares on weakness to my annual and quarterly value levels at $101.52 and $90.28, respectively, and reduce holdings on strength to my monthly risky level at $106.77, which was tested today.
How to use my value levels and risky levels: Value levels and risky levels are based on the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels were based on the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February and March. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in already. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.