The personal-products space and the consumer goods sector have been going through a consolidation phase for the last several months. Several of these stocks are retesting key levels of resistance and looked prepared to break out and began a new rally phase.
Here's how to trade them.
Shares of Colgate-Palmolive (CL) looked like they were preparing to break out of an inverse head-and-shoulders pattern two weeks ago, but pulled back and continued to consolidate adding a complex right-shoulder to the pattern.
Last week, Colgate-Palmolive shares touched the previous shoulder hammer low and then bounced sharply, breaking above the neckline in the $67 area, forming a three white soldier candle pattern. This pattern is considered a moderate bullish reversal indication.
Last month, moving average convergence/divergence made a bullish crossover and has continued higher, while this month, the relative strength index crossed above its center line. The money flow indicators are in agreement with the price momentum indicators and have crossed over their individual signal lines.
A series of lower highs and lower lows can be seen on the Kimberly Clark (KMB) daily chart, but that price action reversed after the November low, forming a triangle bullish pattern.
In December the downtrend line that defined the long-term decline and the 50-day moving average were taken out, and the Kimberly Clark stock price has returned to triangle resistance in the $116.50 area.
Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has crossed above its center line on both time frames, and the aroon indicator, which identifies early shifts in trend, has made a green-over-red line crossover.
Chaikin money flow is in positive territory, and the Bollinger band width indicator is reflecting a degree of band compression that suggests the potential for a volatile move.
Johnson & Johnson and Procter & Gamble
The charts of Johnson & Johnson (JNJ) and Proctor & Gamble (PG) reflect very similar price action over the last two months, with both stocks consolidating below horizontal resistance and currently retesting those levels.
The technical indicators which are not included on this chart show improving price momentum and strong positive money flow, above rising 200-day moving averages.
The sector as a whole and these four stocks in particular look prepared for breakout moves, and a positive start to the week would signal the end of the consolidation phase in the space and potentially the start of a rally period.