PepsiCo Inc. (PEP) is poised to open lower this morning as traders react to its latest earnings release, where it trimmed its full-year earnings forecast. Is this dip going to be a buying opportunity or is it part of a topping process? Let's see what the charts and indicators lean toward.
In this daily bar chart of PEP, below, we can see a downtrend from late January/early February to the middle of May. There is a recovery rally into early August that stops short of the January zenith. Prices have saw-toothed lower the past two months, bouncing very modestly off the declining 200-day moving average line. Prices are also below the declining 50-day moving average line.
The daily On-Balance-Volume (OBV) line shows a rise from May to August, indicating aggressive buying, but the OBV line since has rolled over and now is suggesting more aggressive selling. In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator, which recently moved below the zero line for an outright sell signal.
In this weekly bar chart of PEP, below, we can the zigs and zags of the past three years. Prices are just above the 40-week moving average line, but the line has been in a decline since the beginning of the year. The weekly OBV line looks more positive than the daily line and the MACD oscillator on this time frame is above the zero line but poised for a possible cross to the downside and take-profits sell signal.
In this Point and Figure chart of PEP, below, we have a longer-term potential price target of $160. A weekly decline to $108.68, however, would weaken this chart.
Bottom line strategy: While we have a bullish price target on the Point and Figure chart of PEP, the short-term daily bar chart is bearish. I do not see a big downside risk for PEP, but it needs to rally to $118 to get the chart looking bullish.