Coca-Cola's Bulls Have Something to Prove

 | Jun 19, 2017 | 4:16 PM EDT
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Coca-Cola (KO) made a shallow pullback in the past two weeks but the overall position of the indicators are still mostly positive. Therefore, I will be watching to see if KO resumes its uptrend or if it turns lower, leaving the Dow Jones Industrial Average with one less stock to maintain the uptrend.

Looking at a daily bar chart of KO, below, we can see that prices above the rising 50-day moving average line and above the 200-day average line, which is now turning up. The daily On-Balance-Volume (OBV) line has been rising since early January and helps to confirm the advance. A rising OBV line happens when the volume on up-days is heavier than on down days. The only indicator that isn't moving up is the Moving Average Convergence Divergence (MACD) oscillator, which crossed to a take profits sell signal earlier this month.

In this weekly bar chart of KO, below, we have mixed signals. Prices are above the rising 40-week moving average line. The weekly OBV line inched up just a little in the past five months and looks like it has stopped at its earlier high. The MACD oscillator is clearly bullish above the zero line but this signal could be reversed in the weeks ahead.

Bottom line: After the May run-up and June pullback in KO the bulls need to prove themselves. A close above $46 with increased volume is a sign KO could move higher but weakness toward $44.50 with increased volume will suggest that a decline or a longer period of consolidation is under way.

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