Colgate-Palmolive Breakout Signals Major Trend Reversal

Shares of Colgate-Palmolive Company (CL) spiked to a six-month high of $90.71 during January, ending the month in a strong position - near the highs and at a seven-month closing high of $90.29. Volume confirmed strength of the advance, rising to its highest level for a positive month since August 2011. The company beat expectations on both top and bottom lines during their Q4 report last week, leading to a breakout above a long-term downtrend line. Earlier in the month the 200-week and 50-week averages were reclaimed. This price action shows the bulls taking back control.

Bullish price behavior in January technically completed the bearish correction. It bottomed with a higher swing low of $74.55 in November, near the 78.6% Fibonacci retracement. Note that support was established near a long-term uptrend line over a three-month period before a bullish reversal triggered above a three-month high of $81.35. That line marked lower trend support for the advance following the 2009 low.

Sellers attempted to break below trendline support for several months before failing in January, as buyers took back control and CL stock rallied. Once a low of $75.96 was reached during a minor pullback, a series of higher weekly lows and highs resulted, with each week ending near the high of the period. The advance led to a successful reclaim of the 200-week and 50-week averages. CL had traded below the 50-week average since December 2024. Each sustained breakout confirmed strength of conviction.

Resistance near the 20-month moving average at $90.50 was tested during the advance but not completely. Meaning upward pressure could further test that potential resistance zone. Since January’s settlement was close to the 20-month average, it may represent only a pause before a breakout through the line occurs. A little higher up is the 50% retracement of the prior downswing at $91.96. This zone should be monitored as an area of overhead resistance.

In the short-term, CL stock is becoming overextended and due for a correction of some degree. There has only been one leg up from the bottom so far, and so at a minimum, a second leg up should follow. A retracement to test support near previous resistance likely leads to the next rally off a higher swing low. A launch from the low of a pullback – the first pullback following key upside breakouts – typically provides traders with a better reward-to-risk ratio given the closeness to a low and therefore possible exit stops.

A continuation of the January advance has the potential to eventually exceed the $109.30 record high. But first, CL would need to get above lower swing highs at $94.19 and $100.18 that define the prior downswing. Initial new high targets start with a range from $116.23 to $118.73. The first level is defined by a measured move from the advance seen following the October 2023 swing low. It is joined by a 127.2% Fibonacci extension of the prior downswing following the 2024 peak at $109.30. That is where the current advance will match the size of the October 2023 upswing.

Key areas to watch for support during weakness include the downtrend line and more specifically the 50-week average, now at $85.85. Structure shows possible support near $85.33, which is confirmed with a swing low in February 2025, as another level to watch. Then, of course, there is the 200-week average at $83.60.