Is Coca-Cola Stock Really It?
Off and on the price chart, Coca-Cola (NYSE:KO) is in once again with Wall Street. But before investors make any buying decisions in KO stock, it may be wise to make sure the bubbly price action doesn’t turn entirely flat. Let me explain.
Source: Coca-Cola
Investors hoping for better-than-feared results from Coca-Cola following last quarter’s weak-looking forecast were served a surprisingly sweet corporate confessional this past Tuesday. By the numbers, the beverage giant delivered a two cent profit beat on earnings of 48 cents on sales of $8.02 billion versus Q1 estimates of $7.88 billion.
The top- and bottom-line beat was highlighted by overall strong international sales from Coke’s water and juice products and a sixth straight quarter of double-digit growth from its signature Coca-Cola Zero Sugar soda beverage.
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The bubbly results also had CEO James Quincy backing away from KO stock’s challenging Q4 “blip” and prior warnings. In its place, upbeat dialogue of ‘disciplined growth strategies continuing to deliver strong underlying performance’ was offered.
For their part, investors guzzled down KO shares resulting in a healthy, single serving 1.7% performance. Still, before you think Coke is it again for your trading account, waiting for last week’s fizz to show a bit more sustainability on the price chart looks about right.
KO Stock Daily Price Chart
KO stock enjoyed a nice week off and on the price chart. Technically, though, there’s more work to be done. Overall relative weakness the past couple months has at least one more hurdle to clear before a more meaningful pop in share price to fresh all-time-highs can be realized.
The daily chart shows that since last December KO has established a high-level, corrective double-bottom pattern within its longer-term uptrend. Shares are now in the upper right side of the base. That’s good news, but it’s not a green light to buy shares. At current prices, KO stock faces possible resistance from the pattern’s mid-pivot and an angular downtrend line.
KO Stock Long Stock Strategy
Given the dueling patterns, I’d recommend bullish investors wait before buying KO stock. If shares manage to consolidate laterally for several more sessions, a breakout through last week’s high of $48.72 would also allow for Coca Cola to rally above the described angular resistance. The additional time spent digesting gains and with shares knocking out two potential threats is price action worth buying into.
Should this scenario play out, placing a stop-loss beneath the low of the price congestion in KO stock and taking partial profits at two times that risk makes sense.
Alternatively, if KO stock “is it” sooner rather than later, I’d let the price pop go and watch from the sidelines. Bottom line, with the mid-pivot and prior quarter’s bearish gap slightly above last week’s high, I’d expect a small, but healthy contraction on the price chart to develop. Without it, the belief is KO bulls will be facing increased odds of failure with any purchased long stock positions.
Here, too, if an eventual purchase under these guidelines does occur, minimizing risk by setting a stop-loss below the consolidation and trimming the position as the reward grows to twice the initial exposure makes sense off and on the price chart.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
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