The Procter & Gamble Company (PG) has lifted to the top of the Dow Jones Industrial Average performance list, breaking out above 2014 resistance and trading to an all-time high in the triple digits. A flight to safety has bolstered the rally wave, adding points during last week's broad-based decline, which was triggered by recession fears. The breakout's impressive scope predicts solid upside in the coming months, targeting the $120s.
The stock currently pays a healthy 2.82% forward annual dividend yield, providing another reason to get on board, with the next quarterly payout scheduled for May. It's instructive to note that the personal products giant hasn't received a major upgrade since January, when boutique firm Berenberg lifted its rating from "Sell" to "Hold." This vacuum suggests that Wall Street will play catch-up in the coming months, adding to an already healthy tailwind.
PG Long-Term Chart (1989 – 2019)
A 1989 breakout caught fire, generating a strong uptrend that posted three stock splits into the January 2000 high at $59.19. That marked the highest high for the next six years, ahead of a steep decline that relinquished three years of upside into the March low at $26.38, marking the lowest low in the past two decades. It tested that support level in 2011 and turned higher, entering a slow-motion uptick that ran out of gas less than four points under the prior high in 2004.
A 2006 breakout failed to attract committed buyers, yielding choppy sideways action into a final rally burst that ended above $75 in December 2007. The stock carved a double top pattern into September 2008 and broke down with other Dow constituents during the October crash, generating intense selling pressure that continued into the low $40s in March 2009. The subsequent recovery unfolded in two waves, finally reaching the 2008 high in 2013.
The stock gained ground into the December 2014 high at $93.89 and turned lower in a downtrend that ended at a three-year low in the mid-$60s during the August 2015 mini flash crash. The subsequent uptick reached the 2014 high in September 2017, ahead of a decline to a two-year low in April 2018. It returned to resistance for the second time in November and broke out in February, lifting into the triple digits for the first time since being added to the Dow in May 1932.
The monthly stochastics oscillator entered a buy cycle in June 2018 and reached the overbought level in September. It has been glued to that extreme reading for the past six months, signaling a strongly trending market. The rally into 2019 also generated a breakout above the broad rising channel in place since 2000 (blue lines), indicating unusual strength, while new support in the upper $90s should keep a lid on profit taking.
PG Short-Term Chart (2016 – 2019)
The on-balance volume (OBV) accumulation-distribution indicator entered a distribution phase after posting a new high in October 2016 (red line). Buyers returned in May 2018, generating a slow but steady retracement that mounted the prior high in November. The indicator hit another new high this month, generating a bullish convergence with the price breakout while predicting even higher prices into the summer months.
The stock tested channel support after the breakout, carving a small basing pattern with support at $98.50. The rally into March lowers the odds for another pullback at this time, so sidelined market players wishing to build exposure may need to buy the rally highs rather than waiting for the dip. Even so, it makes sense to wait for a buying spike above $103 because Friday's bearish hanging man candlestick predicts short-term selling pressure.
The Bottom Line
Procter & Gamble stock has broken out to an all-time high on heavy volume, signaling an uptrend that could post impressive gains in the coming months. (For related reading, see "Who Are Procter & Gamble's Main Competitors?")
Disclosure: The author held no positions in the aforementioned securities at the time of publication.