Email of the day (1)
Comment of the Day

September 17 2013

Commentary by Eoin Treacy

Email of the day (1)

on an addition to the Chart Library and consumer related companies
“2 queries for David and Eoin

•  Could you please add Aspen Pharmacare Holdings Ltd to the chart library?
•  Any strong views on some of the multinational consumer companies :

"Glaxo, Unilever, Colgate Palmolive, Kimberly-Clark, Procter & Gamble, Johnson & Johnson.

"Looking at the charts:
- J&J looks the strongest consistent chart pattern over the last year but overbought
- Procter and Glaxo have pulled back to their 200 day MA but stayed above.
- Colgate has touched its 200 day MA but pushed back up
- Kimberly broke below its MA and just about recovered ground and trading just beneath the MA
- Unilever broke down through its 200 day MA and is still a ways beneath its MA

"On a buy low sell high strategy, is there an argument that Unilever could present a buying opportunity?"

Eoin Treacy's view Thank you for this thoughtful email and Aspen Pharmacare has been added to the Chart Library. We regard all of the consumer companies you highlight as Autonomies because of their brand recognition, global reach, strong balance sheets, and exposure to the growth the global middle class. I believe that a look at some long-term charts for the above shares will provide the perspective required to answer your questions.

Johnson & Johnson experienced an explosive breakout from a decade-long range from December and is now moving into a rangier environment as the move is digested by investors. However, the completion of such a long consolidation suggests that the long-term potential for the share remains undiminished and it would be best bought following reversions towards the mean.

P&G also broke out of a lengthy consolidation in December but has spent most of the year ranging. It is currently bouncing from the region of the 200-day MA. GlaxoSmithKline broke out to new 10-year highs in March and has also returned to test the region of the MA. Both these moves can be regarded as first steps above their bases and the benefit of the doubt can be given to the upside provided they hold the breakouts.

Kimberly Clark has been a leader within the sector and completed its base in 2011. It has experienced its largest reaction since 2008 and while prices are currently bouncing from the region of the 200-day MA, some time is probably needed to build support before significant new highs can be sustained.

Unilever has also been a leader within the sector and broke to new all-time highs in 2010. The share has a history of dipping back below the MA so I agree that this is a possible inflection point; not least as the psychological 2500p level is tested. However, a period of ranging is probably the most likely scenario as the previous impressive advance is digested. Colgate has a broadly similar pattern to Unilever but has been more consistent and continues to find support in the region of the MA on pullbacks

Back to top