Coca-Cola Is a Value Play, but Here's What the Charts Say Now

Shares of Coca-Cola have been volatile as has the rest of the market. Here's what the charts say now for the stock.
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After the S&P 500 fell 7.8% on Monday and declined 12.4% in three trading sessions, it’s likely we’re hitting some level of short-term exhaustion. That’s got investors starting to look for some value.

Is Coca-Cola  (KO) - Get Report one of those value plays? On the premise that it may be, the Real Money team is taking a closer look at its Stock of the Day selection, as shares inch slightly higher in trading Tuesday. 

It’s not clear whether the bottom is in at this point, but after Monday’s action investors are beginning to wonder whether the selloff has gone too far, too fast. Coca-Cola stock is down about 13.4% from its highs, while PepsiCo  (PEP) - Get Report is down 11.8%.

However, Coca-Cola still has a strong business despite the market volatility and the impact of the coronavirus. Analysts expect 5% to 6% revenue growth this year and next, along with 6.6% and 8.4% earnings growth in 2020 and 2021, respectively. Plus, the stock still yields over 3% with its dividend.

The valuation is a bit high, but that’s what comes with blue-chip premium companies. How do the charts look?

PepsiCo is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells PEP? Learn more now.

Trading Coca-Cola Stock

Daily chart of Coca-Cola stock.

Daily chart of Coca-Cola stock.

Look at the volatile trading range over the past few weeks. The daily chart above shows Coca-Cola’s stunning drop from $60 to $51.58. Then the rally back to $59 and subsequent decline back to $51.48.

There are positives and negatives from this raging volatility. On the plus side, the stock has a solid downside level to measure against near $51.50. Twice now this level has buoyed Coca-Cola stock even amid fierce market selling.

On the downside though, the stock is below all of its major moving averages. Further, Coca-Cola is struggling to reclaim the 200-day moving average, a level that was support early in the selloff.

A look at the weekly chart below shows a similar struggle with the 50-week moving average. However, KO stock is still above its 100-week and 200-week moving averages, as well as long-term uptrend support. 

Weekly chart of Coca-Cola stock. 

Weekly chart of Coca-Cola stock. 

The current technical landscape gives investors an interesting roadmap. In the case of Coca-Cola, I need to see shares reclaim the 200-day moving average and 50-week moving average. Above that puts $55 on the table, with $59 in play above that.

If it can’t reclaim those moving averages, the $51.50 low is still in play. Below that and the $48 to $49 breakout level is possible, along with the 100-week moving average.

With the Volatility Index VIX so high, traders need to remember to go one step at a time and be willing to let pitches go by without swinging. Remember, this still a tough tape to trade.