Beverage and snack food giant PepsiCo, Inc. (PEP) has an earnings winning streak on the line when the company reports second quarter results on Tuesday, July 10, before the opening bell. The stock closed Friday at $109.56, down 8.6% year to date and in correction territory at 10.6% below its 2018 high of $122.51 set on Jan. 23. The stock has been strong of late and is 14.2% above its 2018 low of $95.94 set on May 9.
Analysts expect PepsiCo to post earnings per share between $1.51 and $1.53 when the company reports earnings before the opening bell on Tuesday. The company has been aggressive in recent quarters with new product offerings, fortifying operations in emerging markets, dynamic marketing and cost-cutting. PepsiCo has delivered positive earnings reports for eight consecutive quarters. (See also: Goldman Sachs: Drink in These Beverage Stocks.)
The daily chart for PepsiCo
The daily chart for PepsiCo shows a "death cross" formation on March 12, when the 50-day simple moving average fell below the 200-day simple moving average, warning that lower prices were on the way. This was confirmed when the stock closed at $112.75 and tracked the stock to its 2018 low of $95.94 set on May 9. The recovery since this low has stalled shy of the 200-day simple moving average, now at $110.38. There are four horizontal lines that show monthly, quarterly, annual and semiannual risky levels of $110.78, $116.06, $121.87 and $122.11, respectively.
The weekly chart for PepsiCo
The weekly chart for PepsiCo is positive, with the stock above its five-week modified moving average of $106.00 and above its 200-week simple moving average at $104.27, which is also the "reversion to the mean," which was crossed several times since the week of April 20. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 65.66, up from 54.79 during the week of June 29.
Given these charts and analysis, traders should buy PepsiCo shares on weakness to the 200-week simple moving average of $104.27 and rising each week, and reduce holdings on strength to my monthly, quarterly, annual and semiannual risky levels of $110.78, $116.06, $121.87 and $122.11, respectively. (For more, see: Comparing Coca-Cola and Pepsi's Business Models.)