By: Christian Tharp, CMT
Like all our favorite trades that come with a straight forward setup, the chart for Procter & Gamble (PG), is setting up in a way that aligns with our trading style. That means, nothing fancy and nothing ambiguous, just an old fashioned test of resistance.
This resistance level comes at around 155, where price is just slightly under right now. As you can see by the PG chart, this level has come in to play several times as support turned resistance and so on. However, now, price is coming up from under this level to once again test the strength of its resistance side of things.
Normally, when a stocks price approaches an overhead resistance level, we would have puts on the radar. But, given the current trend on this stock, we could also watch for a breakthrough of this level to then test the 52-week high of just over 158.
Both trades should be on watch along with watching how price action pans out, giving away where the stock price might go. Will it climb or will it fall?
If it falls, we assume it won’t be by much unless accompanied by some abnormal selling volume, which price action should then confirm. We also have a moving average right below the price, which has acted as support for the stock through the past week or two. This is also something to be mindful of.
If the overall market climbs, then it is reasonable to assume this stock and its price will climb also, again, given the recent trend of the stock over the past couple weeks. Right now, the probability favors climb in our opinion.
What is always a wise approach to a trade like this is patience. Wait and see how price reacts to this key level. For those who want to enter early, do so with smaller size and a tight stop, perhaps using the 50-day simple moving average as a stop level.
For those who want to be patient, wait for a possible rejection of this level and see if we bounce at that moving average. Those who choose patience, remember that we could get a break of this key level with price then falling back down to retest it.
If the retest holds out, then this would be a…
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