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Proctor & Gamble trades $100

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I think shares of Proctor & Gamble will trade $100 before the end of next year, if not $99. The recent bullish triangle and today's trade at $80 loom large for this Dow component. Here's something I couldn't show you in the normal $1 box chart.

Proctor & Gamble Chart - $2 box

One of the advantages of point and figure charts is that they tend to remove noise from a stock. You can continue to remove noise from a stock by increasing the scale by which the stock would be charted using the 3-box reversal method of charting. Today's trade at $80 was very important in the longer-term scope of things for Proctor & Gamble. It's interesting to note how the $2 box scale for PG really hints that a break in the bullish support (blue +) on this scale was quite meaningful back in February 2000 (red 2 at left of chart). That was the end of a long-term upward trend. Recent trading at $78 sure looks like the breaking of a long-term downward trend.

Some may look at the above chart of Proctor & Gamble (PG) and think they're too late to the party to be bullish. If this is you, then keep that in mind. Look at some other stocks you may feel frustrated in and how you missed the move.

Cisco Systems Chart - $2 box

The $2 box scale of Cisco's (NASDAQ:CSCO) chart really shows just how early in the game a trader would be. Based on the $2 scale, the first sign of further trouble would be a trade at $10. Today's 5.6% decline doesn't even have the stock pulling back to $18 on this chart and for an equity bull that has loaded the boat in CSCO at $12 should be considered just a little pullback on profit taking. A trader that loaded the boat at $20? Well, today's 5.5% pullback is not what they had in mind, but probably wasn't thinking about any type of potential pullback.

Cisco Systems Chart - $0.50 and $1 box

While the $2 box gives us the much longer-term picture of CSCO, the conventional point and figure chart is indeed bullish. We saw a strong and meaningful move above the bearish resistance trend and the stock is pulling in today. Today's trade at $19 was enough to now get this chart back into a column of O's.

With bonds seeing selling, I'm looking for an excellent buying opportunity near the $17.50 level. From there we can begin fine tuning a trade and setting up an action point on our bar chart. First sign of trouble on this chart would be a trade at $15.

Do you see how the bullish price objective of $28.50 and a stop at $15 may have had institutions hesitant to buy the stock further at the $21 level? From there, risk/reward was - $6/+$7.50. That just about 50/50. Now that the stock is pulling back, risk/reward become more favorable!

Jeff Bailey
Senior Market Technician
Option Investor

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