The well-known American multinational beverage corporation, Coca-Cola Co (NYSE: KO) shows signs of an upcoming price surge according to its latest charts. This was one of the stocks we had flagged this week for a possible breakout.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the daily chart in a purple color rectangle. Currently, the stock has broken out of this consolidation area with a high volume. Once a stock breaks out from a consolidation area, it usually moves higher.
Daily Chart – KO
#2 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA and had moved higher with high volume. This indicates an overall bullishness of the stock.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, which is a possible bullish indication.
#4 Bullish ADX and DI: The daily chart shows that the ADX line has started to move higher from below the –DI and +DI lines. The +DI line and the ADX line is also currently above –DI line. All these indicate possible bullishness.
#5 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.
#6 Symmetrical Triangle Pattern Breakout: The weekly chart shows that the stock was forming a symmetrical triangle pattern. This pattern is shown as pink color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper line occurs, it usually signifies the start of a new bullish trend. Currently, the stock has broken out of the symmetrical triangle pattern, indicating possible bullishness.
Weekly Chart – KO
#7 Bullish Stoch: The %K line (blue color) of the stochastic is currently above the %D line (orange color) in the weekly chart as well, indicating possible bullishness.
#8 Above Support Area: The weekly chart shows that the stock is trading above a support area, which has been marked as an orange color dotted line. This seems like a good area for the stock to bounce higher.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for KO is above yesterday’s close. This translates to a price of around $54.00.
TP: Our target prices are $60 and $65 in the next 3-6 months.
SL: To limit risk, place a stop loss at $49.90. Note that this stop loss is on a closing basis.
Our target potential upside is almost 11% to 20% in the next 3-6 months.
For a risk of $4.10, our target rewards are $6.00 and $11.00. This is almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara