The Coca-Cola Co stock hardly moved last week. Shares are up a mere 0.5 percent in the past 5 trading sessions. Price action indicates that the stock is ripe for a breakout – the direction of which will decide the short to medium term trend.
Shares of Coca-Cola closed Friday at $44.80.
The Coca-Cola Co Stock is Sitting on a Strong Support Zone
A look at the daily price chart of Coca-Cola shows the stock had been in a strong uptrend since the start of the year. However, weaker than expected Q1 sales saw shares of the beverage giant tumble almost 10 percent.
Revenue declined for the fourth straight quarter as a strong dollar eroded value of overseas sales, while demand remained tepid in Europe. Since that 2-day carnage on April 20-21, the stock has been trading in an extremely tight range above the $44 mark.
One of the very few certainties of equity markets is that periods of consolidation are invariably followed by periods of volatility, and vice versa. As such, traders can expect a breakout in the stock.
Which way will shares breakout? That’s a tough call to make. The only thing, we as traders can do, is to follow price action, and form an informed bias. $44 coincides with multiple past pivots in the stock, making it a key support area. This increases the odds of an upside breakout.
But if the broader markets disappoint, and Coca-Cola convincingly breaks below $44, traders can look to short the stock, with an immediate target of $40 a share.
The Coca-Cola Co – Warren Buffett Love Fest Continues
One bullish trigger for Coca-Cola this week could be the strong vote of approval it recently received from Warren Buffett.
Speaking on Saturday at Berkshire Hathaway’s annual shareholder meeting in Omaha, Buffett rejected claims that calories from Coke alone were contributing to the obesity epidemic.
Buffett said that he consumed close to 700 calories of Coke each day, and there weren’t any evidence to suggest that switching to “water and broccoli” would have been a healthier alternative.
“I elect to get my 2,600 or 2,700 calories a day from things that make me feel good when I eat them. That’s my sole test,” he added. “I like fudge a lot. Peanut brittle. I am a very, very, very happy guy.”
Buffett’s firm owns around 9 percent of The Coca-Cola Co .