Pepsico, Inc. (PEP) is a struggling beverage company with popular brands of chips and dips. The company has been feeling the pinch of shifting from sugary soda drinks to healthier choices, which should be a drag on earnings.

The stock closed Friday at $111.18, down 7.3% year to date and in correction territory when it traded to its 2018 low of $108.88 on Feb. 9. All this downside volatility occurred after the stock set its all-time intraday of $122.51 on Jan. 23. Analysts expect PepsiCo to post earnings per share between $1.30 and $1.33 when it reports results before the opening bell on Tuesday, Feb. 13. Some say that sales of snacks in emerging markets could offset weak sales growth in the U.S. (See also: How Pepsi Is Boosting Results Responsibly.)

The daily chart for Pepsico

Daily technical chart showing the performance of Pepsico, Inc. (PEP) stockCourtesy of MetaStock Xenith

The daily chart for Pepsico shows that the stock has experienced false "death cross" and "golden cross" patterns over the past 52 weeks, so the shares had not been in a solid trend. This made the stock a sell on strength when it was trading at its Jan. 23 high of $122.53, as this strength was a failed test of two key levels. The horizontal lines at $121.87 and $122.40 are my annual and quarterly risky levels. In addition, the stock is below its February pivot of $115.69, which failed to hold on Feb. 5.

The weekly chart for Pepsico

Weekly technical chart showing the performance of Pepsico, Inc. (PEP) stockCourtesy of MetaStock Xenith

The weekly chart for PepsiCo is negative, with the stock below its five-week modified moving average of $116.01. The stock is above its 200-week simple moving average at $102.61, which is also the "reversion to the mean," last tested during the week of Aug. 28, 2015, when the average was $81.45. The day of the low on Aug. 24, 2015, was called "Black Monday" in China, with a "flash crash" at the open in the U.S. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 61.31, down from 75.98 on Feb. 9 after being above the overbought threshold of 80.00 on Feb. 2.  

Given these charts and analysis, my strategy is to buy Pepsi shares on weakness to the 200-week simple moving average of $102.61 and rising each week and to reduce holdings on strength to my monthly, annual and quarterly risky levels of $115.69, $121.87 and $122.40, respectively. (For more, see: How Does Pepsico Make Money?)

 

 

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