Chart Of The Day: Coke Heading Towards $40 Despite Earnings Beat, Raised Outlook
Pinchas Cohen | Oct 26, 2022 06:07
Coca-Cola's (NYSE:KO) $0.69 EPS and $11.1 billion revenue beat expectations. The positive surprise extended a pattern in which the world's largest beverage maker beat estimates for the seventh straight quarter.
It was also its eleventh consecutive EPS beat. Moreover, it raised its full-year outlook having devised two strategies to manage rising costs:
- pass them on to consumers
- offer more affordable alternatives
bearish setup, its slight upper wick renders the candle imperfect, potentially deflating some traders' overconfidence.
Target/h2
A $7.70 move from the Apr. 25, $67.20 H&S top to its Sept. 21, $59.50 breakout from the breakout point targets $51.8.
On the weekly chart, the RSI is retesting its neckline, corresponding to that of the price, whose return move was motivated by the 200 week MA. Like the daily chart, the volume provides a negative divergence, falling against the rising price. Such a paradox suggests diminishing participation and, therefore, a leading indicator for a reversal.
More importantly, the weekly chart may reveal an even large H&S in the making, where our daily H&S is merely its head.
Target/h2
A $13.18 move from the Apr. 25, $67.20 H&S top to its Oct. 10, $54.02 low move from the breakout targets the $40.00 level.
Trading Strategies - Short/h2
Conservative traders should wait for a close below $58.80 to confirm the hanging man. Then a return moves to approve the neckline's resistance.
Moderate traders would wait for the bearish confirmation and a throwback for a better entry, if not confirmation.
Aggressive traders could short now, provided they accept the higher risk.
Trade Sample - Aggressive Short/h2 - Entry: $59
- Stop-Loss: $62
- Risk: $3
- Target: $50
- Reward: $9
- Risk-Reward Ratio: 1:3
Disclaimer: The author has no position in the instruments mentioned in this article.
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