Colgate-Palmolive Co. (NYSE: CL), famous for offering a long list of well-known consumer products, has been stuck on the “spin cycle” since June. Share prices are back where they were three months ago despite surging and dropping several times now.
Net sales and net profit have remained relatively flat over the last twelve quarters, and the next earnings report is expected to be the same.
Over the last four years, CL has remained in stock “purgatory”, whipsawing up and down but always hovering around $70 per share.
It’s been a frustrating run for the company, which has rewarded investors handsomely since it opened for trading at $1.35 in 1984.
The only other periods of difficulty for CL occurred during transformative economic events. The first being the Dot Com bubble, the second, the financial crisis of 2008.
For that reason, shareholders are beginning to worry that CL’s recent struggles could be a warning sign of a recession.
And as convenient as that would be – to simply follow CL’s performance as a recession gauge – it’s sadly a whole lot more complicated than that. There are certainly significant economic hazards out there, but CL’s inability to sustain growth isn’t one of them.
After all, consumer confidence is still riding high according to the latest data from both pollsters and corporations.
Shoppers aren’t lining up to buy Colgate-Palmolive products, though, causing share prices to fluctuate. That might be frustrating to long-term CL holders, but for traders like us, it presents a fantastic opportunity to capture some quick gains.
In the daily candlestick chart above, you can see that after selling off rapidly, CL shares are on the rise once again. The price action bounced CL off the lower Bollinger Band (BB), setting a higher low relative to the low from August in the process.
More importantly, though, the current daily candlestick is trading above the last three. Ideally, I’d like to see four, however recent BB contact coupled with a low stochastics reading is enough evidence to pursue a long trade here.
But only if CL keeps rising. In this case, I want to see it take out the daily high by enough to warrant a trade (at $71.47). If it doesn’t do that, I wouldn’t at all be surprised to see another CL sell-off back to the lower BB.
And much like our last few stocks we’ve examined, because CL is caught in a tight trading “corridor”, we’ll likely see it bounce off key resistance at around $75.50 should it rise above our trigger point.
From there, it’s a strong possibility that CL would rebound off the upper BB before presenting us with a great setup to go short.
However, that’s all contingent upon a CL price surge. The general market, which lingers near all-time highs, has had a hard time truly breaking out into new territory. That would be enough to stifle upwards momentum for plenty of stocks.
But CL doesn’t quite trace the market as most stocks do. For the most part, CL “does its own thing”, meaning that a stalled market might not have any effect on the stock over the next week or two.
And for our purposes, that’s great news. Because in addition to being a nice setup all on its own, it might even shelter investors slightly from a market-wide correction.
