Shares of Colgate-Palmolive are in breakout mode today following an upgrade from Sun Trust.  The stock began today’s session with a powerful upside gap that lifted the stock past the September highs.  CL has remained well bid since the open as it battles heavy resistance near the July peak.  With a solid base underneath the stock is set up well for more upside.

Since late July CL has been trading in a narrow range while holding support near its upward sloping 200 day moving average.  This sideways action followed a flurry of activity that began with a massive earnings inspired downside gap on July 21st.  Three sessions later a rumored takeover by Unilever sparked a rally back up to the July peak.  CL has been stuck inside its July 21 to July 26 range since then.  A clear break past the top of this range could spark a fresh rally leg.

CL now has layers of support in place between  $74.50 and $73.00.  This key zone includes the September high as well as today’s news inspired breakout gap.  If the stock can continue to firm up above this area a fresh rally leg will likely follow.  On the downside a close back below $72.00 would violate the October low sending a clear warning sign.

Of note, CL is scheduled to report its third quarter results on October 27th. 

At time of publication we are long CL in some managed accounts.