Procter & Gamble Still Has Flash Crash Scar Five Years Later

NEW YORK (TheStreet) -- Procter & Gamble's (PG) stock chart still has scars from the Flash Crash of 2010 five years after the event.

The chart still reveals the low price that Procter & Gamble shares reached during the crash, in which the Dow Jones Industrial Average plunged 998.5 points in a matter of minutes. The index quickly recovered much of that decline.

Many of the components of the blue-chip index had their lowest trades canceled as being unrealistic, but Procter & Gamble's remains. The chart shows that P&G traded as low as $39.37 on May 6, 2010.

Procter & Gamble's low price was discussed in detail in a CNNMoney article published on May 6, 2010. Another article posted on May 6, 2010 (and updated on May 25, 2011) at the Huffington Post said that the $39 price would not stand, yet it remains in the the historical database from the New York Stock Exchange. If this low trade did not occur, it should have been scrubbed from the database.

That low price is important, because it can skew how technical analysts read Procter & Gamble's chart. When market technicians look at longer-term technicals, they look for all-time or multiyear highs and lows as key levels. In the case of Procter & Gamble, the $39.37 recorded on May 6, 2010 is its lowest level since July 2002.

Here's the weekly chart for Procter & Gamble.

Courtesy of MetaStock Xenith

The weekly chart for Procter & Gamble clearly shows the low of $39.37 set on May 6, 2010. Was this the "real" low for the day? After five years, analysts must think so, as this low sticks out like a sore thumb on the weekly chart.

Here's the weekly chart for the Dow Jones Industrial Average.

Courtesy of MetaStock Xenith

When you look at the weekly chart for the Dow Jones Industrial Average, there is barely a hint of the volatility during the week of the Flash Crash. During the two weeks before the crash, the Dow failed at its 200-week simple moving average, which was then at 11,134.

The range for the week that ended Friday, May 7, 2010 was 9,869.62 to 11,177.67 -- not that volatile given the weeks that followed. The Dow did not get back above its 200-week simple moving average until the week of Oct. 15, 2010.

The last time the Dow's 200-week simple moving average was tested was during the week of Oct. 7, 2011. The 200-week simple moving average was at 10,650 at that time. This began the momentum upward trend that could be coming to an end this week.

A weekly close on Friday below the key weekly moving average of 17,939 shifts the Dow Jones Industrial Average's weekly chart to negative as weekly momentum at 67.46 is declining below the overbought threshold of 80.00.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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