Procter & Gamble (NYSE 🙂 is expected to open for the market Thursday, for the fiscal quarter ending December 2019.
We expect earnings per share of $ 1.37, unchanged from the previous quarter, compared to $ 1.25 for the same quarter last year, while revenue is expected at $ 18.41 billion, an increase compared to the $ 17.45 billion of the previous quarter, which is even higher than the $ 17.16 billion for the corresponding quarter last year.
P&G earnings have estimates for 15 consecutive quarters and reports earnings for five. Will the series continue? And if so, why is the balance between supply and demand traded so? Although we cannot know for certain that the collective investor does not expect an upside surprise for this income, this may be a sign that the stock is almost empty.
Since October 1, shares have been traded within a converging pattern with an upward bias. This is called a rising wedge. It shows that while a stock has indeed risen, the speed of the climb has slowed.
This marks the possibility that investors are beginning to lose their patience because they do not see the same type of return that they had become accustomed to before the pattern occurred. This is underlined by the 100 DMA as a moving upward line that gives a fair measurement of the upward trend, and marks the bottom of the rising wedge as an important technical pressure point.
The current share price is around 25% above its upward line since the bottom of May 2018. Compare that with the index. It is only about 7% above its upward trend since the closest bottom in December 2018. If we consider the upward line as the normal ascent rate over a period, the Procter & Gamble peak is almost four times as sharp as that of the index on which it is stated, so it has a lot of room to fall to return to a sustainable rally.
Note the negative divergence between the falling channel of the RSI and the rising wedge of the share, another bearish indicator.
Trading Strategies
Conservative traders would wait for a downward outbreak, with a penetration of at least 3% to prevent a bear fall, and then wait for a retreat to demonstrate resistance at the bottom of the wedge.
Moderate traders would wait for a negative outbreak, with a filter of at least 2%, to prevent them from being knocked out of position by a whip saw, and then wait for the expected return movement for better imports, not necessarily for evidence of a reversal.
Aggressive traders can now go short, provided they understand that the pattern is not complete for a negative outbreak and are willing to accept the risk.
Trade sample
Admission: $ 127
Stop loss: $ 128
Risk: $ 1
Target: $ 124, bottom of the pattern, which can be support
Reward: $ 3
Risk: reward ratio: 1: 3
