Colgate-Palmolive

It's been a pretty decent year for shareholders of Colgate-Palmolive ( CL) -- 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 on Stockpickr.

And if you haven't already done so, join Stockpickr today to create your own dividend portfolio.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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