Soft drink giant and Dow Jones Industrial Average component The Coca-Cola Company (KO) is one of the eight "Dogs of the Dow" for 2019. The stock closed Thursday, Feb. 7, at $49.42, up 4.4% so far in 2019 and up 8.2% from its Dec. 26 low of $45.66. The stock is only 2.8% below its all-time intraday high of $50.84 set on Nov. 20.
Coca-Cola stock is lagging the Dow Jones Industrial Average, which is up 7.9% year to date and 15.9% above its Dec. 26 low of 21,712.53. The Dow is 6.6% below its all-time intraday high of 26,951.81 set on Oct. 3.
Analysts expect Coca-Cola to post earnings per share (EPS) of 43 cents when the soft drink giant reports earnings before the opening bell on Thursday, Feb. 14. Coca-Cola has an elevated P/E ratio of 24.03 with a favorable dividend yield of 3.17% according to Macrotrends.
The company continues to diversify away from sugary sodas with new products that include waters, teas, coffees and energy drinks. The Coke Zero Sugar brand has seen favorable demand in recent quarters. The company is putting a six-quarter winning streak on the line in terms of beating EPS estimates.
The daily chart for Coca-Cola
The daily chart for Coca Cola shows that the stock has been above a "golden cross" since Aug. 13, 2018. A "golden cross" occurs when the 50-day simple moving average moves above the 200-day simple moving average, indicating that higher prices lie ahead. When this signal is in play, the trading strategy is to buy weakness to the 200-day simple moving average, which was tested on Aug. 31 at $44.66 and Oct. 11 at $44.67.
A positive reaction to earnings on Oct. 30 prompted strength to the all-time intraday high of $50.84 set on Nov. 20. This day was a downside "key reversal," where the close was below the Nov. 19 low of $50.25. The close of $47.35 on Dec. 31 resulted in the horizontal lines on the chart, which are my semiannual value level at $46.28 and my quarterly pivot at $48.84. Not shown is my annual risky level above the chart at $51.31.
The weekly chart for Coca Cola
The weekly chart for Coca Cola is positive, with the stock above its five-week modified moving average at $48.25. The stock is above its 200-week simple moving average, or "reversion to the mean," at $43.91, last tested during the week of June 29, 2018, when the average was $43.13. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 48.13 this week, up from 44.82 on Feb. 1.
Trading Strategy: Buy Coca-Cola shares on weakness to my quarterly pivot at $48.84 and add to positions on weakness to my quarterly value level at $46.28. Reduce holdings on strength to my annual risky level at $51.31.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.