Procter & Gamble Primed for a Sizable Move

by Serge Berger | October 8, 2013 9:45 am

Procter & Gamble (PG[1]) 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[2]) 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).

xlp Procter & Gamble Primed for a Sizable Move
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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.

pg Procter & Gamble Primed for a Sizable Move
Click to Enlarge

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[3]. Sign up for his free Weekly Market Outlook Video here[4]. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. PG: http://studio-5.financialcontent.com/investplace/quote?Symbol=PG
  2. XLP: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLP
  3. The Steady Trader: http://thesteadytrader.com/
  4. free Weekly Market Outlook Video here: http://www2.marketfy.com/l/15492/2013-05-06/4sf47

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