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  1. Home
  2. / Investing
  3. / Stocks

Coffee Acquisition or Not, Coca-Cola Doesn't Have Much Fizz

Despite $5.1 billion deal for Costa, I'm not slurping any KO up.
By JAMES "REV SHARK" DEPORRE
Aug 31, 2018 | 11:45 AM EDT
Stocks quotes in this article: AMZN, AAPL, AMRS, SGMO, SRPT, KO

Just because the day before the Labor Day weekend is typically slow doesn't meant that momentum traders still aren't working. Amazon (AMZN) and Apple (AAPL) are hitting new all-time highs and keeping the indices in positive territory.

There was some mild profit-taking Thursday, but breadth is slightly positive so far Friday and there doesn't seem to be any concern about the trade headlines that triggered sell programs a day earlier.

It wouldn't be surprising to see some longs move to the sidelines Friday afternoon as FAANG momentum slows, but the positive technical action is driving a "fear of missing out" (or "FOMO"). That's creating strong bids, so the negative news narrative just isn't having any impact.

It's been a good week for traders and stock pickers, as plenty of individual stocks are acting well. For example, Amyris (AMRS) (which I mentioned Thursday) is following through very nicely. I'm still also optimistic about biotechnology names like Sangamo (SGMO) and Sarepta (SRPT) .

My game plan is to take it easy this Friday and look for some entries into the close should the action soften. However, I don't feel inclined to do much additional chasing.

One name in the headlines is Coca-Cola (KO) , which has agreed to acquire coffee-shop chain Costa for $5.1 billion. Costa has 4,000 retail outlets in Europe, Asia and Africa.

KO management says this deal will likely be "slightly accretive," and this is a good example of a very mature company looking for growth outside of its traditional business. However, market reaction to the merger is tepid at best.

Coca-Cola has been sinking since a double top formed after its last earnings reports. There's some support at the 200-day simple moving average around $44, but there's nothing particularly compelling about the chart.

Yes, KO is a stock where big funds looking for safety might park some funds, as its earnings are typically consistent. However, this isn't a stock that's going to make any major moves any time soon. If you're looking for tradable price action, Coke just doesn't have much fizz.

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At the time of publication, RevShark was long AMRS, SGMO and SRPT, although positions can change at any time.

TAGS: Investing | Stocks

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