Background: KO The Coca-Cola Company Consumer Goods | Beverages - Soft Drinks | USA
Along with (KO) several others in the group has earnings announcement scheduled over next week or so. Can't say how these will all go, yet both KO and Pepsico (PEP) are likely to struggle with weakening sale in Soda drinks and probably to some extent on strong dollar from international sales.
However, with Broader market having topped or is close to topping there is anticipated reversal of trend that has been in progress since 2009 low.
Ratio chart of Consumer Staples/Discretionary (see below), which has been showing inverse relationship to the market. It appears that it might have already bottomed. If correct then it could being to rise with broader market entering a downtrend.
This will impact both PEP and KO along with others in the industry in varying degree which can be seen from respective charts of others in the group, where some are forming double tops and others are completing rising wedge. This suggest that all of these appear to be completing their respective bullish 5 wave cycle that began from 2009 low.
Summary of technicals:
1. KO seems be completing major 5 wave cycle from 1960 and is in final part of wave 5 which might achieve new high to around $50 zone.
2. As we have clear 5 waves with wave 5 in final stage in the form of wave "v" the upside is likely to be limited. Unless it has substantial move up, it looks like it could form double top with 1998 high accompanied with RSI divergence both with 1998 and 2008 highs.
3. Potential breakout above 1998 high would result in failed break and could go on to breakdown from the rising lower trendline of the channel.
4. PEPsico has been relatively strong in recent past Vs KO (see PEP chart below) which might continue. However, KO is more liquid in terms of average daily volume and has more competitive Option spreads.
5. Insiders has been busy selling KO in significant chunks for over a year from $40 to current high at $46.95
6. Earnings announcement was disappointing and price has already made initial minor move down.
Conclusion:
The above strongly suggest that a reversal is very likely and initial target would be around $32 area where we have 2008 high with secondary target in the vicinity of $20 being the 2009 low.
Action:
Consider buying Jan 2017 PUT with strike price of $35 quotes as 0.51 - $0.56 with 5cents spread. Allow for the volatility drops and partial retracement of the drop after earnings announcement then attempt to buy around $0.40 - $0.50 or better.
A price drop to $40 would give us potentially 2 time our initial risk.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
Along with (KO) several others in the group has earnings announcement scheduled over next week or so. Can't say how these will all go, yet both KO and Pepsico (PEP) are likely to struggle with weakening sale in Soda drinks and probably to some extent on strong dollar from international sales.
However, with Broader market having topped or is close to topping there is anticipated reversal of trend that has been in progress since 2009 low.
Ratio chart of Consumer Staples/Discretionary (see below), which has been showing inverse relationship to the market. It appears that it might have already bottomed. If correct then it could being to rise with broader market entering a downtrend.
This will impact both PEP and KO along with others in the industry in varying degree which can be seen from respective charts of others in the group, where some are forming double tops and others are completing rising wedge. This suggest that all of these appear to be completing their respective bullish 5 wave cycle that began from 2009 low.
Summary of technicals:
1. KO seems be completing major 5 wave cycle from 1960 and is in final part of wave 5 which might achieve new high to around $50 zone.
2. As we have clear 5 waves with wave 5 in final stage in the form of wave "v" the upside is likely to be limited. Unless it has substantial move up, it looks like it could form double top with 1998 high accompanied with RSI divergence both with 1998 and 2008 highs.
3. Potential breakout above 1998 high would result in failed break and could go on to breakdown from the rising lower trendline of the channel.
4. PEPsico has been relatively strong in recent past Vs KO (see PEP chart below) which might continue. However, KO is more liquid in terms of average daily volume and has more competitive Option spreads.
5. Insiders has been busy selling KO in significant chunks for over a year from $40 to current high at $46.95
6. Earnings announcement was disappointing and price has already made initial minor move down.
Conclusion:
The above strongly suggest that a reversal is very likely and initial target would be around $32 area where we have 2008 high with secondary target in the vicinity of $20 being the 2009 low.
Action:
Consider buying Jan 2017 PUT with strike price of $35 quotes as 0.51 - $0.56 with 5cents spread. Allow for the volatility drops and partial retracement of the drop after earnings announcement then attempt to buy around $0.40 - $0.50 or better.
A price drop to $40 would give us potentially 2 time our initial risk.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
