Out of Fizz? Negotiate Coca-Cola and PepsiCo on profits

How appropriate is it that PepsiCo (DYNAMISM) – Get the report from PepsiCo, Inc. and Coca-Cola (KO) – Get Coca-Cola Company Report both reported gains this morning?

Despite volatility in the overall stock market — not just Thursday, but all year — both of these stocks held up pretty well.

With the current market-wide volatility, Coca-Cola has given up most of its gains and is down slightly on the day, while PepsiCo stock is down around 2% during the session.

Coca-Cola beat earnings expectations, while PepsiCo also beat estimates and increased its dividend.

That said, PepsiCo’s charts show some weakness. Let’s look.

Trading PepsiCo Stocks

PepsiCo stock daily chart.

PepsiCo shares fell below the 50-day moving average and last week’s low this morning.

However, when it rallied from the opening low, the stock was thrown back by those levels. It’s never a good sign, even if it’s hard to tell that the stock is crashing.

When I look at the graph, it looks like it’s running out of momentum, not like it’s heading for the toilet. At least not yet and it probably won’t happen unless the overall market sees much more turbulence.

From here, I keep a close eye on the $165-$166.50 zone. In this area we have the 21 week moving average, the January low and an earlier support/resistance level.

If that fails as support, PepsiCo stock could very well drop into the 200-day moving average and the $158.50-$160 area.

On the upside, it must return to the 50-day moving average.

Trading Coca-Cola Stocks

Coca-Cola stock daily chart.

Coca-Cola stock daily chart.

For Coca-Cola stock, one could argue that it is also about to lose some of its excitement.

Like PepsiCo, Coca-Cola also opened lower that day. However, it has since rebounded from the daily VWAP measurement and recovered the 10- and 21-day moving averages.

That said, it continues to be rejected from the $62 level.

The bulls may want to wait for a clean break above $62.35. If we get it, it could pave the way for an eventual move to $65, where the stock finds its 261.8% extension.

More aggressive longs can consider going long with the stock above all of its short-term moving averages. A break of $60 is a reasonable level to revalue the stock and consider stopping for short-term traders.

On the downside, $58.50 to $59 should be support, as well as the 50-day moving average.

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