Kimberly Clark (KMB - Get Report) looks like it's topping right now. Yes, shares of the $32 billion paper product company have made some respectable returns this year, up more than 13% on top of a 3.6% dividend yield. But as they start losing momentum, KMB is starting to look toxic -- here's what you need to know.
Right now, Kimberly Clark is forming a pattern called a double top. As the name implies, it's formed by two tops that hit their head right around the same price level. The sell signal comes when shares drop through the trough that separates the two tops -- in KMB's case, that trough comes in right at $82. Shares have been consolidating above that $82 level for the last week or so, staging a bounce off of the line on their last test of it. Even so, the bounce looks weak, and shares are coming back down to look for buyers again. If KMB can't catch a bid on this attempt, I think we'll see a breakdown.
I mentioned that momentum has been waning for KMB. The 14-day RSI line (above the price chart) has actually been trending lower since early May, and it's only been accelerating more recently. Dropping RSI means that prices are increasing at a decreasing level -- and since momentum is a leading indicator of price, the downtrend adds some important confirmation that a drop is likely.Ultimately, price is the purest trading signal. A break below $82 means that there aren't enough buyers there anymore to counter selling pressure -- that's the short signal.
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