Madison Avenue might not agree, but Wall Street has declared a winner in the soft-drink wars, with

Coca-Cola

(KO) - Get Report

shares sharply outperforming

PepsiCo

(PEP) - Get Report

in the last two years. It isn't exactly a fair comparison because PepsiCo's brand goes beyond sugary beverages while Coke's brand remains narrowly focused on primary products and natural offshoots like orange juice and energy drinks. But when the stocks go head-to-head, Coke is the clear leader.

Both of these international beverage giants deserve a closer look in this spring market, which is starting to favor safety and defense over growth and risk. For starters, both offer moderate yield plays, with a 2.80% quarterly payout dividend at Coca Cola and 2.90% at PepsiCo. On the flip side, exploding commodity costs could undermine profits throughout their product catalogs in 2011 and beyond.

Sugar and corn futures are trading near multiyear highs, adding considerable costs to the sweetening agents in their beverages, while rising grain prices will adversely impact PepsiCo's classic Frito-Lay brand. Long-term profitability at both companies will depend on their success in passing these increased costs to customers, either through repackaging, reformulation or direct hikes.

This process is well underway at your favorite supermarket, if you haven't noticed, with shoppers experiencing sticker shock across a wide variety of family staples and snacks. I believe these higher prices will take hold because most of the consuming public's anger will be directed toward fuel pump prices, with food increases coming in under the radar.

Coca-Cola (KO) -- Monthly Source: Tradestation

Coca Cola hit an all-time high near $89 in 1998 and then dropped out of favor for the next five years. It bottomed out at $37 in 2003 and entered a slow recovery that banged along the lows for the next three years. The company's weak performance at the time wasn't unusual because fast money was chasing all sorts of bubbles and risk at the expense of slower-growing businesses.

The stock finally took off in February 2006, rising sharply to a seven-year high by the start of 2008. It then got caught in the bear market spiral, dropping all the way back to the mid-decade lows by the start of 2009. The recovery since that time has been sharp and steady, with two rally waves that lifted price back to the 2008 high in December of last year.

Coca-Cola (KO) -- Daily Source: Tradestation

The uptrend then paused at resistance for three more months, completing a massive cup-and-handle breakout pattern. The stock dipped to a four-month low just after the Japanese earthquake and then took off, breaking out two weeks later and hitting an eleven-year high. The rally has paused heading into April, with price consolidating its gains in the mid-$60s.

Interested readers will probably get an opportunity to buy this stock at a lower level because the steep March selloff upset the series of higher highs and higher lows, generating a bearish megaphone pattern that can yield nasty downdrafts. Rising support at the 50-day moving average should contain the downside, however, allowing an entry near the March breakout level.

Pepsico (PEP) - Monthly Source: Tradestation

PepsiCo's stock has been a much stronger performer than its larger rival in the last two decades. The twenty-year chart shows a steady rise, interrupted between 1998 and 2003 by a series of violent whipsaws. Volatility finally eased up at the end of the tech-driven bear market, yielding a channeled uptrend that posted an endless series of new highs into early 2008, when $79.79 marked the top, ahead of the credit-driven bear market.

But its subsequent decline did major damage, dropping the stock to a four-year low. The recovery has been surprisingly weak, given the company's bullish history. Notably, the new uptrend lifted off the 2009 low with the broad market but then failed to push above the May 2010 high, even though the majority of blue chips have cleared identical resistance levels.

Pepsico (PEP) - Daily Source: Tradestation

This resistance has set up at the 62% retracement of the bear market decline near $66.50. Price action in the last eleven months shows the outline of a broad ascending triangle pattern, with horizontal highs and a series of rising lows. No, it isn't a bad pattern for patient investors, but one look under the hood reveals cracks in the engine.

The On Balance Volume (OBV) indicator points to heavy distribution since the May 2010 high. Put simply, funds and institutions abandoned PepsiCo stock last year and still haven't returned. Their activity is vital to a healthy uptrend and breakout into the $70 range so, until OBV picks up and points higher, it's tough to recommend new positions to

RealMoney

readers.

At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Alan Farley is a private trader and publisher of

Hard Right Edge

, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of

The Daily Swing Trade

, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in

Barron's

,

SmartMoney

,

Tech Week

,

Active Trader

,

MoneyCentral

,

Technical Investor

,

Bridge Trader

and

Online Investor

. He has written two books:

The Master Swing Trader

and

The Master Swing Trader Toolkit: The Market Survival Guide

, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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