Coca-Cola Is About To Break Out

Oct. 25, 2020 9:38 AM ETThe Coca-Cola Company (KO)65 Comments

Summary

  • KO is on the verge of a break out.
  • With its fundamentals pointing to higher earnings, I think it is a buy.
  • The stock is pricing in historical growth levels, but I believe it will do much better than that.

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Drinks maker Coca-Cola (NYSE:KO) has been performing quite well of late. The stock took a fair bit of punishment earlier this year, and while that was certainly warranted given the conditions, it appears to me the recovery is visible enough to support the buying we’ve seen of late.

I’ve annotated this chart much more than I normally do because I firmly believe we’re seeing a breakout forming.

If we look at the period of June to late August, we can see that the stock formed an ascending triangle, with the top of it being around $48/$49. The breakout occurred in late August and shares ran up to ~$52. There’s been a period of consolidation since then, but if we look at the very right side of the chart, we can see another ascending triangle forming.

There is trendline support (blue arrow) that has been holding since the late June bottom, and higher lows have been made in recent weeks. While there may be one or two more connect points with the trendline, I firmly believe we’re about to see Coca-Cola break out above the $52 level and make a run at pre-pandemic highs.

The good news is that if the ascending triangle pattern fails, there is strong support at the former breakout level of ~$48, which is also annotated above. Therefore, I think you’ve got some pretty clearly defined parameters for this one and you’ll know fairly soon if the break out is occurring or not.

Earnings support the bulls

Coca-Cola reported Q3 earnings just a few days ago, and results were weak compared to last year. That, of course, is expected given the fact that away-from-home venues remain incredibly weak for Coca-Cola. This segment includes things like movie theaters, sports stadiums, and other places where people would normally congregate in large groups, but aren’t allowed

This article was written by

Josh Arnold profile picture
22.11K Followers
Author of Timely Trader
Maximize your gains through live trading with alerts ahead of market trends

I've been covering financial markets for ten years, using a combination of technical and fundamental analysis to identify potential winners (and losers) early, particularly when it comes to growth stocks.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in KO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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