The daily chart shows the stock consolidating for the last five months in a horizontal channel delineated by support in the $41 area and resistance in the $44 area. It has been trending higher for the last two months on a parallel trajectory in time and price to its November/December rally, and is currently retesting the top end of the channel. A pattern breakout projects a price target, measured by adding the height of the channel to the channel top, near the $46 area.
The parameters of the channel could also be used as potential Fibonacci retracement levels and as another way to project a target price. This technique is different than normal Fibonacci extensions, which first require a determined range. It works in reverse and assigns current technical levels as possible future retracement levels, and in doing so projects a range high. In this case, the August low is the Fibonacci starting point, and by using the October break above the 50-day moving average as a potential 62% Fibonacci retracement level, the other levels fall into alignment with the channel borders and centerline and project a $46 range high, in agreement with the pattern projection.
But before the target can be achieved, the stock has to break above resistance and not pull back like it did in December. A more positive-looking technical picture suggests it will this time, with both the relative strength index and moving average convergence/divergence tracking higher and above their centerlines. On the money flow side, the accumulation/distribution line is above its 21-period signal average, and Chaikin money flow, an oscillator based on an average of the A/D line, is well into positive territory.
Coca-Cola is a buy after an upper candle close above channel resistance using an initial stop under the recent rising trend line.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.