It's been a pretty decent year for shareholders of
(CL - Get Report)
-- the $50 billion household goods stock has rallied around 14% since the first trading day in January, on top of a 2.4% dividend yield that the firm has paid out over the same period. But Colgate's price action suggests that those good times could be coming to an end...
That's because CL is currently forming a head and shoulders top. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. A breakdown below the pattern's support level, called the neckline, triggers the sell signal for this stock. Just remember that until the breakdown happens, there isn't a trade to take here.
And lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: a recent academic study conducted by the
Federal Reserve Board of New York
found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."
I'd recommend keeping an eye on the uptrending neckline in CL for the next week and change.
To see this week's trades in action, check out this week's
Must-See Charts portfolio
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