You invest in the stock market to make money, but you also want to preserve your capital. And in an investment environment dominated by uncertainty—regional bank fallout, inflation, rising interest rates, geopolitical tensions—investors are leaning towards implementing defensive strategies for their portfolios.
One of the defensive sectors that have gained traction in the last month is Consumer Staples. So it shouldn’t come as a surprise to see a stock in that sector like Procter & Gamble (PG) gain favor among investors (click on chart below for a live version).
CHART 1: DAILY CHART OF PG STOCK. The stock price is almost at a resistance level. It could pull back from there, but what happens after the pullback could indicate whether the upward move is likely to continue.Chart source: StockCharts.com. For illustrative purposes only.
Looking at the daily chart of PG, the stock price is approaching a resistance level of just above $153. There’s a high probability that PG stock will pull back, not because it’s close to its resistance level, but because volume has stayed below its 25-day moving average in the last four trading days.
It may help to look at a longer-term chart of PG, such as a weekly chart (see chart below), to confirm the price movement in the stock.
CHART 2: WEEKLY CHART OF PG. The stock is trading above its 50-, 100-, and 200-day moving averages and could reach its all-time high price of $161.67 and may even bust through it, depending on underlying economic conditions. Chart source: StockCharts.com. For illustrative purposes only.
So, if the stock is ripe for a pullback, why would it be one to add to your ChartLists? For the following reasons:
- Momentum. Price action during the pullback can indicate the strength of the next upward move. If the stock were to pull back to around $148 (blue dashed line) and bounce back up from there on strong momentum, there’s a high probability of the stock hitting its all-time high of $161.67 (red dashed line). And if the Consumer Staples sector continues to outperform, then the stock could hit a new all-time high.
- Moving averages. The stock is trading above its 50-, 100-, and 200-day moving averages. This further confirms the uptrend.
- Price relative/relative strength. The relative strength with respect to the S&P 500 index ($SPX) is trending higher. For as long as that uptrend is in play, PG would be a great candidate for a long position, all else equal.
- StockCharts Technical Ranking. After running a SCTR scan that scans for large-cap stocks with a SCTR that has crossed above 80, PG was a chart that deserved some more insight. If the SCTR stays above 70 during the pullback and moves higher on the bounce, the likelihood of a further upward move in the stock’s price would be strengthened.
The Final Word
Although it may not be time to hit the buy button just yet, it’s worth watching how the overall economic environment plays out. The March jobs report suggests the labor market could be softening, and, if that’s the case, there’s a chance the Fed will slow down its interest rate hikes to maybe just one more quarter-point hike this year. If that’s the case and we’re in an economy that’s in “slow growth” mode, then Consumer Staples stocks will probably be in favor. And that could give PG a boost.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.