With almost six weeks left till the end of the year, the S&P 500 is looking to close out 2023 on a positive note. While some may see this as a time to mellow down and enjoy the holidays, others will continue to seek opportunities. Investors playing the long game look for companies with a positive outlook, like the coveted Dividend Aristocrats. Offering growth and reliable income, these stocks are listed on the S&P 500 and have consecutively increased their dividends for at least the last 25 years. Some of these stocks have been lagging the broad market for most of the year, and others have started showing signs of recovery, with the potential to, or having crossed over their open price for this year.
Why is that important? There are technical and psychological implications when a stock crosses above or below its year-open price. Psychologically, this signals a transition from the previous market sentiment to a new phase, like a red candle turning green intraday. From a technical perspective, this potential change in sentiment can raise volatility and trading volume due to the momentum shifts and positive outlooks. In this article, we will look at three Dividend Aristocrats closely trading above their year-open price that you should look out for.
General Dynamics (GD)
General Dynamics Corporation is an aerospace and defense company specializing in ships, land combat vehicles, weapon systems & munitions, and technology products. It's famous for developing the F-111 fighter bomber, F-16 fighter jet, and M1 main battle tank. Over the years, the company has also become a significant builder of liquid natural gas tankers. Its reputation in the industry has made it the prime contractor for the U.S. Navy's Trident nuclear submarine program. Recently, the company has been bagging contract after contract, like the Virginia class submarines, HIGLAS modernization, and the IDIQ Contract for the Indian Health Services. This continued positive news has put GD in a strong recovery mode, and appears to be an excellent opportunity for income investors looking for potential stocks in their long-term portfolio.
Should you buy now?
GD is trading close to its year-open price while in a rising channel. Its 14-day RSI steadily oscillates above a rising trendline, signifying a solid upward trend for GD. Its 50-day (red) and 100-day SMA (yellow) lines are playing catch-up with the current price, supporting the current direction. Investors looking to capitalize on this potential shift in sentiment for GD can wait for prices to trade and close above its year-open price or hit its lower trend channel for a possible entry for a higher timeframe trade.
Colgate-Palmolive Company (CL)
The next Dividend Aristocrat (and Dividend King) in our list is one of the most recognizable brands in every American household. Colgate-Palmolive is a consumer and household products company that manufactures and sells oral, personal, home care, and pet nutrition products under names such as Colgate, Emex, and Meridol. The company recently announced a robust third quarter with a 10.5% increase in net sales, a 16% increase in GAAP earnings per share (EPS), and a 9.0% growth in organic sales. Despite market challenges like higher raw material costs, CL improved operating profit margins across most regions by employing strategic pricing and cost-saving measures. Its strong leadership and the strength of its brand make it one of the best stocks to watch out for.
Will this reversal continue?
CL has been trading bullishly after carving its bottom in early October after buyers immediately rushed in to pick it up. Its 14-day RSI also trades in the bullish zone, highlighting strength in the upward trajectory. However, investors and traders should keep note that while there is potential for CL to move above its year-open price and go bullish on its year candle, it has to have a substantial amount of value and establish strong support above the opening to convince other traders that this is not a just a relief rally.
Clorox Company (CLX)
Last on our list is another well-known industry giant to consumers and professionals. Clorox Company manufactures various cleaning, disinfecting, and professional products. This includes bags, personal care products, wraps, water-filtration products, natural personal products, disinfecting products, and more. The company is best known for its bleach, disinfecting wipes, and cleaning products. Clorox recently changed its management with the election of Linda Redle as the board of directors chair. CL also received rewards like the EPA Green Chemistry Award and EPA’s U.S. Partner of the Year Award.
Will CLX turn bullish?
CLX has been trading bearishly in the year's second half and finally carved a low on November 1, 2023. The price gap has sharply increased and is trading close to its year-open price. It was previously signaling a strong bullish divergence in its price and 14-day RSI before finally reversing, where buyers aggressively stepped in and pushed prices back to almost the year’s open level. However, the speed of its recovery shows that prices are now overbought territory, and a contracting volatility signals that a potential correction may be near, giving investors and traders interested in CLX a chance to buy in.
Final Thoughts
The security’s year-opening price can be a key metric in stock trading. It gives traders and investors a general sentiment of the market toward the security, which can help indicate if buyers are still looking at the security bullishly or bearishly. However, the signal is not the be-all and end-all of trading; always complement your trading strategies with different technical and fundamental analysis tools to get the best chance of profitability.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
