Don't Ignore This Chart

Coca-Cola Loses Some Fizz

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Stocks surged over the last 12 days with the S&P 500 gaining over 10% and moving above its late December high. Coca-Cola (KO) was leading the market with a new high in November, but did not partake in the broad market rally here in January. SPY is up around 3.63% year-to-date, but KO is flat for the year. Moreover, a bearish continuation pattern is forming on the chart.

The price chart below shows KO breaking support with a sharp decline in the second half of December. The stock consolidated after this breakdown as a pennant formed. A consolidation after a sharp decline is a bearish continuation pattern and a break below last week's lows would signal a continuation lower. The downside target would be to around 44.

Note that KO is still above the rising 200-day SMA and hit a new high just two months ago. Thus, one could argue that the long-term trend is up. While the December breakdown and underperformance in 2019 are bearish, keep an open mind because an upside breakout at 47.7 would be bullish.


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- Arthur Hill, CMT

Senior Technical Analyst, StockCharts.com

Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill


Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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