Procter & Gamble (PG) is a well-known, stable consumer products manufacturer that offers a range of brands covering laundry and cleaning, paper, beauty care, food and beverages … and frankly isn’t the type of stock many traders look at. In fact, consumer staples in general — a “defensive” sector — doesn’t swing in too sexy a way for many traders.
But at the current juncture, I beg to differ.
The entire consumer discretionary sector — as measured by the Consumer Staples SPDR (XLP) exchange-traded fund — has traded in a choppy trading range since topping out in May, where its steep first-half rally ended. After its latest test of the upper range of said trading range in mid-September, XLP turned lower again.
Now, over the past handful of trading days, XLP has curled up right near its rising 200-day simple moving average (red line).
If the XLP breaks below its 200-day MA, it has next support at $39, which is a little more than 1% away. That’s no biggie for sure, but it could have larger implications for Procter & Gamble stock.
Not too surprisingly, the daily chart of Procter & Gamble shows plenty of resemblance to that of the XLP. After falling from its mid-September high, PG stock quickly sliced through its 200-day MA, but has since chopped back and forth in an uncharacteristically tight range. During the past five trading days, PG has barely moved — and all of this is occurring below its 200-day MA, but right at a multimonth support level.
It’s an interesting spot for Procter & Gamble stock for sure, particularly because such a tight trading range has a high likelihood of leading to a relatively large move.
In which direction PG will move we do not know yet, but such tight trading ranges have a great track record of leading to good breakouts/breakdowns.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.
