Coca-Cola Is Turning Flat as Temps Rise
Here's why the shares could soon reverse to the downside.
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Shares of Coca-Cola KO were looking strong when I wrote my last review June 7 where I recommended, "With or without rum, traders could go long KO at current levels, risking to $60.50. The $76 area is my price target for now."
KO shares have struggled the past month despite my increased consumption of Coca-Cola as the temps have climbed.
Let's check the latest charts and indicators and the proof of the rum.
In the daily bar chart of KO, below, I can see that the shares bounced off the rising 50-day moving average line in May and June but now they are trading below the still rising 50-day line.
Trading volume has declined slightly in the past two months. The On-Balance-Volume (OBV) line stalled in mid-May and has softened a bit in recent weeks. The Moving Average Convergence Divergence (MACD) oscillator has worked lower and lower since the middle of May and is close to the zero line.
In the weekly Japanese candlestick chart of KO, below, I can see a number of candles in June that tell me that the shares could soon reverse to the downside. KO still trades above the rising 40-week moving average line but the trading volume has been shrinking and that means that investor interest is going elsewhere.
The weekly OBV line has made only modest gains the past four months. The MACD oscillator is above the zero line but it has narrowed significantly in recent weeks and that tells us that the trend strength has waned.
In this daily Point and Figure chart of KO, below, I can see a price target in the $73 area but a trade at $60.42 weakens this chart.
In this weekly Point and Figure chart of KO, I can see a similar chart pattern as the daily chart above.
Bottom-line strategy: Traders should raise stops to a close below $62 from $60.50.
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