Coca-Cola (KO) Trading at 4-Week High After Mixed Quarter

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Coca-Cola (KO) Trading at 4-Week High After Mixed Quarter

Component of the Dow The Coca-Cola Company (KO) is up more than 2% in pre-market trade on Tuesday after meeting second-quarter 2020 earnings per share (EPS) predictions of $0.42. Revenue fell by a stunning 28% to $7.2 billion, falling just short of projections. Global unit case volume fell dramatically throughout the quarter as well, reflecting the severe challenges caused by the COVID-19 epidemic. Due to the ongoing uncertainty, the firm decided not to issue fiscal year 2020 forecast.

Key Takeaways

  • Coca-income Cola’s is suffering because of venues that have been shuttered owing to the epidemic.
  • The firm refused to offer fiscal year guidance.
  • Investors have been flocking to PepsiCo while shunning Coca-Cola shares.

The beverage giant’s revenue is heavily reliant on global relationships with restaurants, entertainment, and sports facilities that have been shuttered or reduced in capacity due to the epidemic. Unlike PepsiCo, Inc. (PEP), which recently topped second quarter 2020 predictions by a good margin and is trading reasonably close to the 2020 high, the stock has failed to recover after the first quarter’s 40% drop. Coca-competitor Cola’s has profited by a very popular range of at-home foods such as Doritos, Quaker Oats, Tropicana, and Lay’s Potato Chips.

Coca-Cola Weekly Chart (2013 – 2020)

Coca-Cola ultimately completed a round trip into the 1998 high of $44.47 in 2014, before easing into a shallow ascending channel that crisscrossed the preceding high periodically until the third quarter of 2018. Committed bulls then gained over, resulting in a channel breakthrough with an all-time high of $60.07 in February 2020. The stock subsequently fell along with global markets, failing to make a multi-year breakout before settling in March at a four-year low in the mid-$30s.

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The first-quarter slide destroyed channel support, while the June rebound was halted by fresh resistance in the high $40s. That level has nearly coincided with the.50 selloff retracement level and the 200-day exponential moving average (EMA), forming a tough barrier that is unlikely to be broken after this morning’s mixed data. Weak purchasing activity also reduces the chances of a breakthrough into the low $50s, with the accumulation-distribution indicator on-balance volume (OBV) plunging towards first-quarter lows.

What exactly is a trading channel? A trading channel is formed by connecting a security’s current support and resistance levels with parallel trendlines. A trade channel is often referred to as a pricing channel.

PepsiCo Weekly Chart (2009 – 2020)

PepsiCo stock plummeted to a six-year low in 2009 before beginning an upswing that culminated in a new high in 2013. Throughout the majority of the decade, long-term trendlines led price activity, with support generally aligned with the 50-month EMA. In 2019, the stock broke out above the upper trendline, extending a strong rally impulse that culminated in an all-time high of $147.30 in February 2020. The March selloff struggled to break out before finding support at a two-year low just below the lower trendline.

The rally into April extended all the way to the.786 Fibonacci selloff retracement level, the biggest high in the previous four months. Since then, the stock has been consolidating near the 50-day EMA and.618 retracement line, forming a probable bull flag continuation pattern. In contrast to Coca-Cola, PepsiCo accumulation has skyrocketed into the third quarter, with on-balance volume reaching an all-time high. This positive stance implies that pricing will soon follow.

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What Exactly Is Accumulation? Accumulation is often used to describe a holding size in an asset that grows over time. Accumulation may also refer to the adding of holdings to a portfolio as a whole. It may also refer to a surge in overall purchasing activity in an asset.

The Bottom Line

On Tuesday morning, Coca-Cola matched cautious second-quarter 2020 profit projections, prompting a buy-the-news response, although a significant decrease in quarterly sales may temper investor excitement. As a consequence, competitor PepsiCo seems to be a stronger long-term option, particularly given its competitive dividend yield of 3.07% vs Coke’s 3.56%.

Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.

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