We know that Procter & Gamble (NYSE:PG) - even as a blue chip - has a significant growth potential given the quality and reputation of its products. The strong customer base and its steady expansion in the world market makes PG an attractive investment.
Furthermore, its safe dividend is one of the reasons for the demand of the company stock. If this was not enough, PG has been reorganized and seems to be ready for a more dynamic response.
Anyway, there are those who think that the company will find increasing difficulties with the competition. On the other hand, it is still in the final stage of implementation of a significant marketing reorganization with a focus on core brands and countries that matter most for the company.
Put simply, we can say that the information at our disposal is basically favorable. However, recently, the company went through a complicated reorganization that is still ongoing. This is another case where technical analysis - always in a long-term perspective - can help draw valid conclusions.
Charts courtesy of StockCharts.com
First of all, let us observe the 15-year weekly chart above. Easily one concludes that PG is in a long-term uptrend with prices above the EMA(50) and EMA(200). On the other hand, the former is above the latter and both moving averages are pointing upward. Even with two EMA(200) breaks - in 2015 of a very short duration - the ascending long-term trend line is still solid.
Let us now analyze the strength of the uptrend. Looking at the 3-year weekly chart above, it seems that the top at $89.40 is the only issue to highlight. In fact, the stock price must exceed that mark as soon as possible. Besides that - except for the bottom in mid-2015 - the Force Index(100) indicator is strong and the Relative Strength Index (RSI) has shown strength with records always above 40.
As a particular situation, there is an ongoing bullish inverse head and shoulders. The neckline resistance - at around $77-$80 - was broken several months ago. This pattern can lead in a short while to a price target of around $92.
It is also important to see if any significant medium-term signs may indicate a possible situation of weakness or even trend reversal. Looking at the 6-month daily chart above, it appears that there is no other problematic situation. On the chart, we can see that the stock price broke on the rise the resistance at $83, which is crucial to the progression of the pattern mentioned above. About MACD (Moving Average Convergence/Divergence Oscillator), we can see that the upside momentum is now increasing as the 12-day EMA has crossed the 26-day EMA.
In any case, it is advisable to note the signs that - with regard to stock prices - may indicate an inability to rise, continued weakness or even the likelihood of a fall. Thus, we have the following important warning signs that we must monitor:
1.The stock price must exceed the top at $89.40 because if it fails to do that for a long time, inevitably, the uptrend will be damaged, and there may be the possibility of a trend reversal.
2. A fall into the tight trading range between $80 and $83 - prevailing from February to June - would be an obvious lack of strength.
3. Prices remaining below the EMA(50), currently still in the $80 area, would show a very negative situation.
4. Any price below the EMA(200) - especially if sustained at this level - would be a strong warning of a trend reversal.
5. The RSI indicator below 40 would indicate a loss of trend strength that could point to a downtrend.
Despite the weakness shown in mid-2015, PG maintains a long-term bullish trend. In addition, the inverse head and shoulders pattern will help share prices to rise and return to a stronger condition. But it is actually necessary to confirm the sustained surpass of the top at $89.40. Furthermore, we must always focus on the price movement given that PG has shown that it has a relevant drawdown potential, which may be dangerous and has to be taken into account.
For now, PG shows a solid uptrend, which will likely allow the continuation of the rise in the stock price. The target of $92 pointed by the pattern mentioned above is a real possibility with an advance that usually is never straightforward.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.