'Dog of the Dow' Coca-Cola Reports Within Range

Soft drink giant and component of the Dow Jones Industrial Average The Coca-Cola Company (KO) is one of the eight "dogs of the Dow" for 2018. The stock closed last week at $45.92, up just 0.1% year to date and down 5.5% since setting its all-time intraday high of $48.61 on Jan. 26. The stock is up 10.8% since setting its 2018 low of $41.45 on May 15. From its Jan. 26 high to its 2018 low, the stock fell by a correction of 14.7%, and this range is being consolidated since then. Meanwhile, the Dow 30 is 8.4% below its Oct. 3 all-time intraday high of 26,951.81 and is 5.8% above its 2018 low of 23,344.52 set on April 2.

Analysts expect Coca-Cola to post earnings per share of 55 cents when the soft drink giant reports results before the opening bell on Tuesday, Oct. 30. The company continues to diversify away from sugary sodas. This includes waters, teas, coffees and energy drinks. My favorite is the Coke Zero Sugar brand, which I stock up on whenever Publix Supermarket offers coke brands on BOGO (buy one, get one free).

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. 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. On Oct. 10, the stock failed at my quarterly risky level at $46.42, which is the upper horizontal line on the chart. My semiannual value level is $44.23, setting up a tight trading range.

The weekly chart for Coca Cola

The weekly chart for Coca Cola will become positive if the stock ends this week above its five-week modified moving average at $45.78. The stock is above its 200-week simple moving average at $43.41, which is the "reversion to the mean," last held on June 29. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 60.69 this week, up from 57.84 on Oct. 26.  

Given these charts and analysis, traders should buy Coca-Cola shares on weakness to my semiannual and monthly value levels at $44.23 and $41.37, respectively, and reduce holdings on strength to my annual risky level of $52.35. My quarterly pivot is $46.42.