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Procter & Gamble  (PG)  , which reports second-quarter earnings before the opening bell on Tuesday, is overvalued fundamentally and overbought technically.

Given this combination, my call is to reduce holdings on strength up to its all-time intraday high at $116.52. Expect its monthly and weekly pivots at $114.47 and $115.95, respectively, to be magnets on earnings volatility.

P&G is a component of the Dow Jones Industrial Average and has been a solid performer so far in 2019. The stock ended last week up 23.7% year to date and is in bull market territory 44.9% above its Oct. 12 low of $78.49. The stock set its all-time intraday high of $116.52 on July 16. 

Analysts expect P&G to earn $1.06 a share when it reports on Tuesday. The consumer staples giant has beaten earnings estimates for 16 consecutive quarters, but the stock isn't cheap with a P/E of 26.25 and dividend yield of 2.60%, according to Macrotrends.

Wall Street expects P&G to continue its earnings winning streak. The company has been improving its product marketing including updated packaging. The company also has implemented improved productivity to offset recent cost headwinds. Growth through acquisitions has been a positive but pressures grow due to higher commodity prices, shipping costs and currency fluctuations.

The Daily Chart for Procter & Gamble

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Courtesy of Refinitiv XENITH

Procter & Gamble has been trading above a "golden cross" since Sept. 12, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. Given this signal, investors were able to buy the stock on weakness to the 200-day SMA at $80.35 on Oct. 11. This was just before a positive reaction to earnings released on Oct. 19. Since then the stock has been climbing its 50-day SMA now at $110.57. The close of $100.65 on June 28 was an important input to my proprietary analytics. The annual value level remains at $101.52 as it was based upon the Dec. 31 close of $91.92. This level was a pivot (or magnet) between March 13 and March 22 as a buying opportunity. The second half value level is $103.20 with the third quarter value level at $99.23. The monthly pivot for July is $114.47 and this week's risky level is $115.95 versus this morning's high of $115.80.

The Weekly Chart for Procter & Gamble

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Courtesy of Refinitiv XENITH

The weekly chart for P&G is positive but overbought with the stock above its five-week modified moving average at $112.63. The stock is above its 200-week simple moving average or "reversion to the mean" at $87.64, last crossed during the week of Oct. 26. The 12x3x3 weekly slow stochastic reading ended last week at 88.83 up from 87.43 on July 19, well above the overbought threshold of 80.00. If this reading rises above 90.00 the stock would be in an "inflating parabolic bubble" which is warning that a 10% to 20% decline could occur over the next three to five weeks.

Trading Strategy: Buy weakness to the semiannual, annual and quarterly value levels at $103.20, $101.52 and $99.23, respectively. Reduce holdings on strength up to its all-time intraday high of $116.52, which will be influenced by monthly and weekly pivots at $114.47 and $115.95, respectively.

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How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on June 28. The quarterly level was changed at the end of June. 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. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."

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