Trading Procter & Gamble's Breakout Amid Defensive Sector Rotation

November 24, 2021 13:07

With global stock market indices trading at record highs, some investors are now repositioning and hedging their portfolios for a potential decline.  

This sector rotation from growth stocks to defensive stocks can lead investors towards companies such as Procter & Gamble - a leading consumer staple stock favoured by institutions. 

Analysts have turned increasingly bullish on the stock in the last few months with some calling for new record highs in the next few quarters. Learn more, including how to trade it further below.   

Stock: Procter & Gamble Co.
Exchange: NYSE
Symbol for Invest.MT5 Account: PG 
Symbol for Trade.MT5 Account: #PG 
Date of Idea: 24 November 2021
Time Line: 1 - 3 months
Entry Level: $149.00
Target Level: $168.00
Stop Loss Level: $137.00
Position Size for Invest.MT5 Account: Max 7%
Risk: High

* The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world. 

* The Trade.MT5 account allows you to speculate on the price direction of stocks and shares using CFDs. This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.

Source: Admirals Contract Specification  

All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing. 

Why Trade Procter & Gamble Stock? 

There are a variety of reasons why the market is turning bullish on Procter & Gamble, let’s have a look at a few.  

Reason 1: A defensive stock used to hedge against a slowing economy 

Defensive stocks are stocks that tend to be stable during the different phases of the business cycle. The opposite of a defensive stock is a cyclical stock; these are stocks that only perform well when the economy is growing. 

Procter & Gamble is seen as a defensive stock because no matter what the economy is doing, people will still need to buy its goods which are classed as consumer staples. This includes brands such as Pampers, Pantene, Ariel, Fairy, Oral-B, Gillette and many others.  

With most global stock market indices trading at record highs, some investors will be using sector rotation strategies (moving from growth into defensive positions) to hedge against a potential correction lower.  

Reason 2: High pricing power stocks are in favour right now 

According to research from Goldman Sachs, stocks with high pricing power have outperformed those with lower margins. Procter & Gamble is a stock with high pricing power as they have the ability to increase their prices to offset other costs.  

For example, the recent global supply chain crisis forced Procter & Gamble to increase the price of its goods, thereby offsetting any potential impact on its bottom line. With new lockdown restrictions in Europe, these kinds of stocks are likely to be in demand.  

Reason 3: A 131-year history of paying dividends is hard to beat 

Procter & Gamble has a long, reliable history of paying dividends. These are rewards paid to shareholders for investing in the company and typically comes from any profits the company has made.  

At the time of writing, Procter & Gamble’s dividend yield was 2.37%. The company also has a history of increasing its dividend and it has positive annual net income to do so. These kinds of stocks are favoured by income investors who look for dividends as income payments.  

With the Admirals Invest.MT5 account you can invest in stocks and collect dividend payments as an extra income stream.  

What are Analysts Forecasting for Procter & Gamble Stock? 

According to analysts polled by the Wall Street Journal, there are currently a higher amount of buy ratings on the stock than sell ratings. While it is not that much higher, the most interesting aspect is the fact the number of buy ratings has increased over the past three months.   

Source: WSJ22 November 2021 

An Example Trading Idea for Procter & Gamble 

An example trading idea for Procter & Gamble's shares could be as follows:  

  1. Buy the stock on a break above $149.00 
  2. Target the highest analyst rating at $168.00    
  3. Place a protective stop loss at $137.00   
  4. Keep your risk small at a maximum of 7% of your total account.   
  5. Time Line = 1 – 3 months  
  6. If you buy 10 Procter & Gamble shares:  
    1. If target is reached = $190 profit   
    2. If stop loss reached = $120 loss 

Risk management is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade.  

The example figures above have been calculated using the Admirals Trading Calculator which enables you to view what your profit or loss could be based on the numbers you input – a great tool for traders!   

How to Buy Procter & Gamble Shares in 4 Steps  

With Admirals, you can buy shares in US companies like Procter & Gamble with a low commission of just $0.02 per share and a low minimum commission of just $1.   

  1. Open an account with Admirals to access the Trader’s Room.   
  2. Click on Trade on one of your live or demo accounts to open the web platform.   
  3. Search for Procter & Gamble at the bottom of the Market Watch window and drag the symbol onto the chart.   
  4. Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.   

Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance. 

Click on the banner below to buy Procter & Gamble stock today! ▼▼▼ 

Do You See Procter & Gamble Moving Differently?  

Remember that all analytics and trading ideas are based on the personal view and experience of the author.  

If you believe there is a higher chance Procter & Gamble's share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.  

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  • The Analysis is prepared by an independent analyst, Jitan Solanki (analyst), (hereinafter “Author”) based on their personal estimations.    
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Jitanchandra Solanki
Jitanchandra Solanki Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.