Colgate-Palmolive Charts Say Buy the Stock

Buy Colgate-Palmolive down to its semiannual pivot at $71.58. Holding this level targets its annual risky level at $85.22, which would be an all-time high.
Author:
Publish date:

Colgate-Palmolive  (CL) - Get Report makes the consumer products that everyone will be buying during the coronavirus pandemic, like toothpaste and soap. 

And the charts say the stock is a buy.

The stock has gained 26% off a low of $58.40 on March 23. This strength is supported by a positive weekly chart.

My call is that the stock is headed for a new high as my annual risky level is $85.22. The stock is above its semiannual pivot at $71.58, which supports the upside.

Colgate-Palmolive is a new member of Jim Cramer’s Action Alerts PLUS charitable trust.

Here is a link to the story that explains the logic behind this defensive pick.

The stock ended last week at $73.42, up 6.7% year to date, and is 26% above its March 23 low of $58.40. It's also 5.2% below its Feb. 10 high of $77.41.

The stock does not have a history of beating earnings-per-share estimates. 

The New York company usually beats or misses by a penny a share or matches expectations. The stock is thus stable when the company's report quarterly results. 

The next earnings report is set for May 1 before the open, and analysts estimate its earnings per share at 72 cents.

The stock's p/e multiple is elevated at 26 and its dividend yield is 2.4%, according to Macrotrends.

The Daily Chart for Colgate-Palmolive

Daily Chart for Colgate-Palmolive

Daily Chart for Colgate-Palmolive

Courtesy of Refinitiv XENITH

The daily chart for CL shows that when the stock touched its March 23 low, it stayed above its Dec. 26, 2018, low. That's a positive.

The stock confirmed a golden cross on March 19, 2019, when the 50-day simple moving average rose above the 200-day simple moving average. A move of this sort confirms that higher prices will follow.

From a peak of $76.41 to a low of $64.75, the stock corrected 15%. This was followed by a bull run of nearly 20% up to the Feb. 10 high of $77.41.

Then came the bear-market correction of 25% to its March 23 low of $58.40.

Since April 1, the stock has been above its quarterly value level at $63.11 and crossed both its monthly pivot at $67.59 and its semiannual pivot at $71.58, which is the key level to hold.

The Weekly Chart for Colgate-Palmolive

Weekly Chart for Colgate-Palmolive

Weekly Chart for Colgate-Palmolive

Courtesy of Refinitiv XENITH

The weekly chart for Colgate-Palmolive is positive, with the stock above its five-week modified moving average at $70.37. 

Since last week the stock has been above its 200-week simple moving average, or reversion to the mean, at $69.77.

The 12x3x3 weekly slow stochastic reading is projected to rise to 56.28 this week from 48.6 on April 17.

Trading Strategy: Buy weakness to the semiannual pivot at $71.58 and to the 200-week SMA at $70.38. Reduce holdings on strength to its annual risky level at $85.22.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the March 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

StreetLightning Videos With Jim Cramer: