I often write of the nightly scans that I run. I originally developed the scans in 2009. They were designed to bring my attention to stocks that were experiencing possible reversals on their daily charts.
After running them for months and seeing certain tendencies, I started running the same scans with the same criteria, only with weekly indicators instead of daily ones. I can tell you that it is rare to see a stock on the daily scans with a bearish signal, and then see it the same day on the weekly bullish list. But that is exactly what happened with Procter & Gamble (NYSE: PG) on Friday.
Let’s take a look at the daily P&G stock chart first. We see a downward sloped trend channel that has dictated trading for the last five months, and we see that the stock is bumping up against the upper rail in the $81 range.
We can also see that the daily slow stochastic readings just made a bearish crossover, which has been a pretty good sign that the stock is heading lower during the last five months. The declines aren’t huge, but they have generally been in the 5% range.
Now if we look at the weekly chart, we see a stock with weekly slow stochastic readings that were in oversold territory until the last few weeks. We also see that it was in an uptrend for most of 2014 before starting to slide late in December.
Because of the mixed signals from the daily and weekly charts, I decided to look at the monthly chart as well. Normally I don’t look at monthly charts, as they tend to be beyond my preferred investing horizon, but in this case I am glad I did. What we see on the monthly chart is that the stock is the most oversold it has been since the end of the bear market in 2009.
I also found it interesting that the trendline that served as support from 2001 to 2008 seemed to serve as resistance from 2009 to 2012. The stock broke above the trendline in early 2013, but could it serve as support once again?
What is really interesting is that if the daily bearish signal is accurate and delivers a small decline like it has during the past five months, this would bring the stock down to where it is just above the trendline we see on the monthly chart.
Here is how I would play it. If you are a short-term trader looking for quick moves that can generate a 5% return, I would make a bearish play based on the daily chart. However, I would take profits on any bearish play once the stock got down around $76.
If you are an intermediate- or long-term investor, I would look to buy P&G stock once it drops. I think the longer-term pattern in the weekly and monthly charts will win out in the long run.
Collect Dividend Income Every Month!
We’ve put together a simple calendar that pulls together all the market’s best dividends into a single, easy-to-read document. One look, and you’ll be able to set up a 12-month dividend stream for regular income every month.