Coca-Cola (KO) - Get Report will report earnings on Tuesday before the stock market opens. The action so far Monday doesn’t exactly scream confidence, with shares down 1.5% while the broader stock market is in positive territory.
Shares have bounced back from the March lows, but the action has been less than stellar for the bulls. That’s surprising to some, given the “pantry rush” we saw during the early days of the coronavirus pandemic.
Stocks like Walmart (WMT) - Get Report and Kroger (KR) - Get Report did just fine given this catalyst, but Coca-Cola stock isn’t seeing the same kind of traction. The selloff of PepsiCo (PEP) - Get Reportafter its post-earnings pop last week likely isn’t helping matters.
Let’s look at the critical support level that must hold once Coca-Cola reports its quarterly results.
Trading Coca-Cola Stock
Earlier this month, Coca-Cola stock bounced hard off uptrend support (blue line). The move sparked a multi-day rally, as shares reclaimed the 20-day and 50-day moving averages before settling into a tight trading range between $46 and $47.
For me, $43.51 becomes must-hold support once Coca-Cola reports earnings. That is the June low, which comes into play just below current trend-line support and the July low.
In other words, if Coca-Cola closes below $43.50, it will have lost this month’s and last month’s low, in addition to uptrend support. It would also mean that Coca-Cola stock lost the 20-day and 50-day moving averages, as well as the 50-month moving average near $43.80.
If this situation plays out, it puts the May low in play at $42.81, followed by the April low at $41.42.
As for the upside, I want to see a rotation over last week’s high at $47.19. Above puts $49 resistance in play, followed by the 200-day moving average near $50.
While bulls are hopeful that the post-earnings reaction is to the upside and not the downside, the key here is to see that support holds. If that’s the case, Coca-Cola may continue its slow but steady grind higher.
Additionally, watch for a similar reaction to what PepsiCo had last week. That's where shares opened higher after earnings but faded lower afterwards and moved lower.