The gloves are off.
Billionaire Nelson Peltz's Trian Fund Management is undertaking a proxy fight with consumer products giant Procter & Gamble Co. (PG) , as the activist investor tries to shake up the blue-chip giant and wring more value out of shares.
According to a proxy filing Monday morning with the SEC, Trian will look to put Peltz in a seat on P&G's board, a move aimed at changing the firm's "slow-moving and insular" positioning. Trian owns 37.6 million shares of Procter & Gamble, which adds up to around 1.5% of outstanding shares.
Peltz's previous attempt to get on P&G's board was rejected by the company earlier this month. Now, he's hoping that a shareholder vote will change the situation.
But while Procter and Trian go back and forth this summer, there's a more immediate buy signal shaping up in shares. To spot it, we're turning to a technical chart of Procter & Gamble's long-term price action:
You don't need to be an expert technical trader to figure out what's happening in P&G's price action in 2017. In fact, the price action in this blue-chip stock is about as basic as it gets.
Procter has been bouncing its way higher in a well-defined uptrending channel since last summer, catching a bid on every test of trendline support. In other words, the last six tests of Procter's price floor have provided investors with an optimal buying opportunity before the ensuing leg higher. And shares are testing that same support level for a seventh time this week. Simply put, it makes sense to buy the next bounce higher in P&G.
Actually waiting for that bounce is important for two key reasons: It's the spot where shares have the most room to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before the channel breaks, invalidating the upside trade). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring Procter can still catch a bid along that line before you put your money on shares.
From a risk-management standpoint, prior lows just above $85 look like a logical place to park a protective stop. That's because, if shares violate their prior floor just above that $85 price level, the uptrend is over and you don't want to own it anymore.
P&G is bouncing Monday on news of the proxy battle with Trian; that makes today as good a time as any to pull the trigger on the Procter trade.
WATCH HERE: TheStreet's new series #AlphaRising:
- Meet The Women Redefining Business in TheStreet's New Series, Alpha Rising
- Carly Fiorina: We Have a Shortage of Leaders
- Alpha Rising: Meet The Children's Place CEO Jane Elfers
- Alpha Rising: Victoria Schein, Ford Engineer, Making History One Patent at a Time
- EY's Kerrie MacPherson Discusses the Importance of Diversity
- Meet Ford's 23-Year-Old Prodigy Who Holds 15 Patents
- EY: No Company Can Afford to Disenfranchise Half the Workforce
- Why Shark Tank Star Kevin O'Leary Would Rather Invest in a Startup Run by Women