Dow component The Procter & Gamble Company (PG) could offer safe haven against the pandemic storm in coming weeks after holding long-term support at the 200-week exponential moving average (EMA). Vicks, NyQuil, and Charmin sales are far less cyclical than Model 3s, iPhones, and Air Jordans, allowing Procter & Gamble to maintain strong revenues and a forward dividend yield that has now lifted to 2.96%. It might still fall with other stocks, but reinvested dividends could positively affect future returns.
Stifel, Argus, and Deutsche Bank all upgraded Procter & Gamble stock to "Buy" in the past two weeks, with Argus analyst Chris Graja insisting that "periods of severe stock-market turbulence have proven to be good times for investors with a longer-term time horizon to focus on the highest-quality and financially strongest names." More upgrades are likely to follow, underpinned by the company's Dow Jones Industrial Average membership.
PG Long-Term Chart (1990 – 2020)
Procter & Gamble stock charged higher during the 1990s, splitting twice during an ascent that topped out in the upper $50s at the start of the new decade. It got cut in half in the next three months, finding support in the mid-$20s, which marks the lowest low in the past 19 years. A slow but steady uptick completed a round trip into the prior high in 2005, yielding a 2006 breakout that stalled in the mid-$70s in the fourth quarter of 2007
A decline through the 2008 economic collapse relinquished about 40% of the stock's value, less than the majority of the market universe at that time. It bottomed out in March 2009 and turned higher into the new decade, but it took four years for the recovery wave to complete a round trip into the prior high. An immediate breakout added less than 20 points into December 2014, when the uptrend topped out once again.
That resistance level rebuffed 2017 and 2018 rally attempts, yielding a higher long-term low in December 2018, ahead of a February 2019 breakout that attracted healthy buying interest for the rest of the year. This bullish tide continued into the second half of February, posting an all-time high at $128.07 before rolling over with broad benchmarks and dropping 26% into the March 23 low at $94.34.
The monthly stochastic oscillator has just crossed into a sell cycle from the overbought level, predicting relative weakness that could last into the third quarter. The stock has bounced on top of new support at the same time, but the adverse cycle raises the odds that this level will break and generate a selling wave into the nine-year trendline of rising lows in the mid-$70s. That price zone has narrowly aligned with the 200-month EMA, potentially offering a low-risk long-term buying opportunity.
PG Short-Term Chart (2016 – 2020)
The on-balance volume (OBV) accumulation-distribution indicator topped out in 2016 and entered a distribution phase that ended in the second quarter of 2018. Subsequent buying power reached resistance a few months later, generating a breakout that matched the stock's strong advance to an all-time high. It's possible that OBV will drop into the black support line at the same time that price pulls into the lower red trendline, adding reliability to a bottom call in the $70s.
The bounce that started last week has now reached the .382 Fibonacci selloff retracement level, which also marks broken support at the Feb. 28 low. Short-term price action could mount this barrier in coming sessions, but resistance then increases exponentially, with low odds that the upside will exceed the 50% retracement near $112. As a result, it makes sense to stand aside here if you want to average into a long-term dividend play and wait for the low to get tested and/or broken.
The Bottom Line
Proctor & Gamble stock could offer safe haven in coming weeks, underpinned by a non-cyclical sector and impressive dividend that isn't likely to be suspended.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.