Financial journalists are running with stories about the latest news on Action Alert PLUS holding PepsiCo, Inc. (PEP) . The company's longtime leader and well-regarded CEO Indra Nooyi just announced her retirement. Management is a difficult thing to quantify but it can certainly affect the price of a stock. I will leave that kind of analysis to others and I will stick to my charts and indicators.
I favored the long side of PEP last month and told readers of RealMoney that, "The price and indicators of PEP have come on strong the past two months. More gains are possible. New longs should look to buy a dip to around $112 if possible. Raise all stops to $107."
Let's get a cold one from the refrigerator and look at the charts again.
(For more on PEP, see Jim Cramer: Consumer-Staples Stocks Aren't Done Rallying.)
In this updated daily bar chart of PEP, below, we can see that PEP is poised to test and probably break the January highs. The slope of the 200-day moving average line turned bullish last month and the 50-day moving average continues to rise fast and strong. I would look for the 50-day line to cross the 200-day line in the next few days or weeks.
The daily On-Balance-Volume (OBV) line has been climbing strongly since May telling us that buyers of PEP have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator gave a buy signal in June and looks to be narrowing towards a fresh buy signal.
In this weekly bar chart of PEP, below, we see a strengthening picture. Prices are above the now rising 40-week moving average line.
The weekly OBV line shows a strong rally the past three months and this tells us that there has been good accumulation/buying.
The weekly MACD oscillator is close to crossing the zero line for a buy signal on this longer time frame.
In this Point and Figure chart of PEP, below, we can see that a trade at $117.69 will be a small double top breakout - likely today - and open the way to a test of $120.05. A $158 price target is being projected.
Bottom line: Continue to hold longs in PEP. Raise stop protection to $110. Add on strength above $120 if you want while $158-$160 is our price objective.