Procter & Gamble's Pullback Could Be Just the Beginning
Procter & Gamble (PG) - Get Report is in the early stages of what could develop into a steep pullback.
The stock fell below a key trend line last Friday and has been trading in a tight consolidation since. This sideways action may end soon following Thursday's weak close. Overhead pressure is building, and could result in a steep selloff. For patient P&G bulls, lower entry levels -- quite possibly much lower -- could be just ahead.
P&G's powerful rebound move off the August lows carried the stock more than 18% higher before reaching a stiff resistance zone. Despite a powerful upside gap on Oct. 23, which fell in the middle of three straight heavy accumulation days, the stock stalled just above $77. This major resistance zone includes the stock's 2014 low as well as the June low of this year.
The ugly selloff that began in late July accelerated dramatically once the $77 area was clearly broken. Another monthly high now appears to be in place near this zone as P&G again turns lower. With an ominous moving average convergence/divergence cross adding overhead pressure, the current fade could be quite deep.
As the current pullback plays out, Procter & Gamble investors should focus on the $73.40 area. This key zone includes the stock's September high as well as its scooping 50-day moving average. Considering the increasingly bearish setup, a hold here would be very impressive. If this area gives way, a complete retracement of the October range is likely. For now, the September lows are key for the bulls.
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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long P&G.