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LivestreamMenuThis week we aren’t focused on a quick trade, but a smart trade. When investors begin rotating out of high-beta growth stocks, money often finds its way into the market’s most dependable businesses. We are starting to see this rotation occur as many consumer staple stocks are coming back to life. This week we want a stock with strong fundamentals, a safe dividend and that is technically rebounding, giving the investor a great risk/reward opportunity over a longer time horizon. Kimberly-Clark (KMB) fits that description. The consumer staples giant behind Huggies, Kleenex, Cottonelle and Scott sells products consumers buy regardless of the economic backdrop, making it one of the market’s classic defensive names. After spending much of the past few years lagging the broader market, shares have begun to stabilize and turn higher. Add in the scheduled closing of the $48.7 billion Kenvue deal and the combination brings Tylenol, Neutrogena and Listerine into the fold alongside real cost-synergy potential. While much of the turnaround comes down to execution that includes restructuring, cost discipline and product innovation, recent price action is giving us optimistic signs that the turnaround has already begun. The Reversal Setup From a technical perspective, the stock is quietly building one of the more constructive charts in the consumer staples sector. We look to our turnaround checklist and examine the daily chart going back to its March 2025 highs to get a better gauge. Has the stock stopped going down? Clearly, we can see a bottoming formation just under the $94 level that held on multiple occasions before bouncing higher. Have we broken our longer-term downtrend? Not only did we break the downtrend, but we retested it from the other side as former resistance is now acting as support. Are we trading above key moving averages? Yes. The stock has eclipsed and stayed above both its 50- and 200-day moving averages. In fact, it is days away from signaling a “golden cross”. Are momentum indicators flashing buy signals? While we aren’t seeing major signals, we did get a bullish divergence in the relative strength index (RSI). As price was bottoming its momentum indicator was trending higher, showing that a change may be coming. Lastly, when in doubt – back it out. How does it look on multiple time frames? Let’s look at price performance over a two-decade period on a monthly time basis for true perspective. Here we see a multi-year consolidation area. Shares have found a floor around $96 and seem poised to move higher. These are the risk/reward scenarios we look for when giving a longer-term trade idea. Shares have managed to hold in their longer, neutral range and now have eclipsed their 50-month moving average. Volume surged near the bottom, where price had flushed out and begun to turn higher. The recent action in its RSI is confirming our bullish thesis and the MACD is curling positive, nearing a buy signal. The Trade… Based on our technical checklist we believe that shareholders have experienced the worst of the recent downdraft. The risk/reward is favorable to buy at current levels. Limit your downside risk to $95. The first achievable upside target should be a push to $120. That would fill the gap caused by the news of the Kenvue deal. A break above that resistance area should see shares start a slow and steady run towards the top end of that long term neutral range around $150. It won’t happen overnight, but the path looks set for shares to move towards its upper range once we can put a Band-Aid over that price gap at $120. Jay Woods, CMT with Chase Games DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More
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