PepsiCo, Inc. (PEP) was reviewed last week, where I wrote that, "PEP looks like it is rolling over for a retest of the May low. Prices might dip to $98 or even $97 and if the volume of trading is light we would probe the long side of PEP risking a close below $96." Action Alerts PLUS holding PEP traded firmer than anticipated in the past week, rallying to a new high for the move up. Can the rally continue or will it fizzle? Let's check the charts again.
In this daily bar chart of PEP, below, we can see that prices have rallied above the still declining 50-day moving average line. The 200-day average is still pointed down. The daily On-Balance-Volume (OBV) line has moved up to a new high to match the gains in price. The Moving Average Convergence Divergence (MACD) has risen and is close to moving above the zero line for an outright go long signal.
In this weekly bar chart of PEP, below, we do not have any significant improvement in the past week. Prices are still below the declining 40-week moving average line. The weekly OBV line only shows a small move up in a longer move down. The weekly MACD oscillator has narrowed slightly but it is not real close to a cover shorts buy signal.
In this Point and Figure chart of PEP, below, we can see an $81 downside price target. Even though prices are in a bullish up column of "X's" there is still a lot of overhead chart resistance.
Bottom line: PEP has moved higher without the benefit of a retest of the May low. The indicators are improving with the price action but a price low without a retest typically makes me nervous. If you recently went long I would use a $99 sell stop. If you have no position then I would be patient and wait for that retest dip.