Shares of Coca-Cola (KO) shed about 17% of their value following a September 2024 high around $73. After making a lower low into January, the strength of the downtrend has lessened, with improvements in price momentum confirming a likely bottoming phase. Our multiple time frame analysis suggests an upside breakout above resistance around $65 could propel KO back toward 2024 highs. When a stock is an established downtrend, we are always looking for signs of a potential upside reversal. One of the most common bottoming patterns is called a “bullish momentum divergence”, where price is making new lows but the RSI is making higher lows at the same time. The daily chart of KO shows a clear bullish momentum divergence using the price lows in November 2024 and January 2025, as the RSI is sloping higher during this period. This divergence implies that the selling pressure is beginning to alleviate, and a potential bottom could be imminent. Now that this early warning system has fired, what would confirm an upside breakout? I’m immediately drawn to the 200-day moving average around $65.20, which lines up quite well with the November swing high at $65. If KO could push above this resistance level, that could represent a completion of the bottoming phase and the beginning of a new bullish trend. We can confirm this technical structure using Fibonacci retracements, using the September 2024 high and the low from earlier in January: Using this framework, we can see the 38.2% retracement level sits around $65.50, creating a “confluence of support” along with the November swing high and the 200-day moving average. This provides further confirmation that a break above $65.00-65.50 would represent a likely new bullish phase for Coca Cola. One caveat to this bullish thesis would be the relatively anemic volume that KO has shown over the last three months. The bottom panel on the daily chart shows the Chaikin Money Flow, an indicator that tracks the trends in volume by weighting each day’s volume reading by the strength of the daily price action. We would need to see the CMF indicator push above the zero level on any breakout, suggesting an influx of buyers pushing KO above resistance. The weekly chart provides more of a long-term perspective on how the recent pullback relates to previous downdrafts for Coca Cola: We’re using the weekly PPO indicator to identify pullbacks that rotated back to a bullish trend phase. The thick green lines indicate a strong buy signal, where the PPO indicator crossed over the signal line well below the zero level. Thin green lines represent a weaker buy signal, where the PPO indicator buy signal occurred at or above the zero level. Note how the price action after the strong buy signals usually led to strong impulse moves to the upside, and the weaker buy signals often served as continuation alerts, representing additional upside after the first buy signal. The price action in January has created conditions very similar to previous strong buy signals, as the PPO indicator is very close to signaling a new uptrend phase for KO. We can also see that the PPO histogram is trending higher, an early warning sign that has fired before every strong buy signal in the last seven years. There’s no denying that Coca Coca and other consumer staples names have struggled to keep pace with high flying growth stocks over the last 12 months. But a review of the charts of this global beverage giant suggest a period of outperformance may be just around the corner. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
