COCA-COLA stock: an interesting choice

COCA-COLA stock: an interesting choice

2020-01-14 • Updated

Warren Buffet approves

On a weekly chart below, you see the Coca-Cola stock price performance. Although it doesn’t look exactly stable, the long-term picture it gives is clearly an uptrend. Especially in the last year, as growth became more aggressive than before. We can see that the Moving Averages lined up in ascending order, with the price being much above and showing yet no sign of a wavy pattern it used to have before. Additionally, Warren Buffet’s Berkshire Hathaway has a big portion of Coca-Cola shares in possession since the 1980s. It may be a good reassurance that this stock is likely to perform well in the long-term (although Mr. Buffet commented that the performance in the last decade is not as good as before). Therefore, we have the fundamentals that this stock is a buy, from a long-term perspective. What about shorter horizons?

11.png

Prepare to dive

On the same weekly chart, we can see that the current price of $56 per share rises slightly above the previous high. With that, it makes a clear bearish divergence with the Awesome Oscillator. It makes sense both graphically and intuitively: the price has been high above the Moving Averages for too long – every time that happened, it went down to the 200-week MA to bounce back up.

12.png

The same reading is provided by the daily chart below – a bearish divergence foreshadowing the coming drop. So the question here is likely to be not “if” but “down to where”? Observing the previous wavy drops of the Coca-Cola stock price, we can roughly distinguish two types of such scenarios: when the price touches the area of 50-MA and 100-MA, and when it makes a heavy dive into the area of the 200-day MA. In the first case, we can expect the support to be at $54.50, in the second – at $52.50, both adjusted to the expected future position of the indicator in the time of the drop.

13.png

Three paths

Based on these observations, there are two possible scenarios for a trader.

The first one, a standard for the long-term investor, is “buy and hold”. It is “guaranteed” that this stock will eventually rise, so the only thing you have to do is to have it in your portfolio and let it grow. Wait out the temporary drop, and the next one – your patience defines your profit.

The second one is a more active approach – you wait for the drop to take place, and buy once the price reaches the bottom. If you see it drop to $54.50 and start a correction upwards – buy; if you see it dive lower to the 200-MA area of $52.50 and then aim back up – buy. Sell when it gets back to the previous highs or above.

There is a third one, though. But it is riskier. You use the expected bearish cascade to sell higher and buy lower. That means you sell right now, and then wait for the price to go into the bearish move promised by the indications. Eventually, when the price is in the lower areas discussed before, you buy. The obvious risk here is that you make the first step now – before the price makes its move. If it doesn’t act according to the indications, you will be in a weak position. On the other hand, this tactic is the quickest one, and if it works out, it will let you gain the profit at the soonest. The choice is yours.

Opportunities

As you can see, stock market offers plenty of opportunities for a trader. To trade Coca-Cola with FBS, you need to:

  1. Open the MT5 account in your FBS personal area.
  2. Make a deposit.
  3. Download MT5.
  4. Log in and start trading.

In addition to that, you can learn how to follow earnings reports and trade on these news - they are major corporate performance indicators influencing stock price performace.

And as ausual, stay informed and learn the trading tactics.

Similar

How will the reporting season affect US indices?
How will the reporting season affect US indices?

Earnings season is a crucial time for investors and analysts, as it provides insights into how well companies have performed over the past quarter and gives indications of their future earnings. In 2023, expectations for US Q1 earnings were low due to economic challenges and rising interest rates. Surprisingly, many companies beat these low expectations, with 75% of S&P 500 companies surpassing forecasts.

Latest news

Gold is Rising Despite Inflation Returns
Gold is Rising Despite Inflation Returns

Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.

Can the Chinese Economy Recover?
Can the Chinese Economy Recover?

Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera