Procter Gamble technical outlook – no place to hide

The monthly chart of PG shows the 8 year old trend has been broken and, although the stock seems to be resilient for now, it’s just a matter of time it comes down. We are in the very early stage of this stock, since we just saw wave 1 down but over time it should lose half of it’s value roughly. The least target medium to long-term is the 200 month MA around 40 now. By the way, the SPX has just traded back to 200 month MA at 992.

We might even have seen already wave 1 down and are already in wave 2 up for PG, but I believe that for now 55 will be the low of this wave although a small extension to 52.75 was/is possible. Well, assuming the magnitude of wave 1 stays at $20 and that wave 2 should end around 67, our minimum target for wave 3 down with a 1.38 factor is 40. That also fits into a fundamental picture, PG trades at 17 PE which is 40 % to rich by many ways. Profits will drop due to a negative currency situation (a strong euro was helpful) and to consumers searching for cheaper products, turning away from brands with the global recession unfolding. Finally, 17 times earnings is not warranted for any consumer product company and will be adjusted over time.

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~ by behindthematrix on October 21, 2008.

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