Coca-Cola (NYSE: KO) is expected to report quarterly earnings of Q4 on Thursday before the market opens. The consensus EPS forecast for the quarter is $ 0.43 for revenue of $ 7.06 billion. For the same quarter last year EPS amounted to 0.39 with a turnover of $ 7.5 billion.
It is worth noting that the soft drink giant in the last 16 quarters has defeated the consensus EPS prediction 13 times and equaled the prognosis once. In four years, the company has only missed once on consensus EPS prognoses.
After this series of beats, however, the company will have to surprise considerably to give the stock a boost. That or some real progress in the US-Sino trade negotiations.
As a consumer type, Coca-Cola will likely perform better than cyclic sector stocks, as the growing fear of ending the longest bull market in history becomes reality. Nonetheless, we see signs of weakening the momentum of the stock.
KO Daily Chart
Others, however, are more optimistic. Carter Worth, head of technical analysis at Cornerstone Macro, said Friday about the CNBC option action, which suggests in the graphs that Coca-Cola is about to break out. He points to the outperformance of the shares last year. While the index rose only 4% during that period, the increase increased by 15%. He also relies on the uptrend line since May 2018.
We are not that optimistic. In our opinion, the momentum is faltering. The stock has bounced four times on the 200 DMA since July. The question that traders have to answer is whether the price will be higher than the $ 50.84 peak in November and that the short and medium term upward trend will remain synchronous with the long term.
If the RSI is an indication, this will not happen, because the momentum indicator produced a negative deviation, which fell during the Christmas Eve sale, even when the price remained above the low point of October. This suggests that the prices also go to those lows. In addition, the weekly RSI is busy developing what could be a huge Head & Shoulders summit.
However, after the jump from 5% to $ 47 in the last two weeks, we would advise waiting for a pullback, at least on the uptrend line since the post-Christmas rally, at the $ 48 level , or for a new peak, above the peak in November, to pave the way for a continued upward trend.
Moreover, yesterday's trade pattern developed a shooting star, proving that bears had the last word. Given that shares were closed yesterday for $ 49.61, lower than the psychological $ 50 level, and also below the peak of $ 50.84, we are betting on a downward move.
Trading strategies
Conservative traders must wait for a new peak to confirm the upward trend, followed by a return movement that would show sufficient demand to pick up the supply at those levels, to raise prices further. This would be demonstrated with at least one long, green candle, followed by a red or small candle of both colors.
Moderate traders would wait for a new peak, followed by a downward correction for better entry, but not necessarily to test the trend, or for a correction up to $ 48, at the beginning of the January consolidation by the 50 and 100 DMA & # 39; s and the uptrend line since the pre-trade route .
Aggressive traders can introduce a shortcoming, which offers an attractive risk-return ratio, except in the case of derailments.
Trade sample
Mention: $ 49.60
Stop loss: $ 50
Risk: $ 0.40
Target (NYSE :): $ 48
Reward: $ 1.6
Risk-Reward Ratio: 1: 4
