Wall Street firms have been burning the midnight oil to see which companies might be affected by our new president and his campaign rhetoric. The smart guys and girls at Goldman Sachs Global Investment Research focused on what could happen to trade and pored over the stats for retail consumer companies with significant sales exposure to Mexico in 2016. Coca-Cola (KO) made their list at 8%.
Coca-Cola made a peak this year in April -- and it has continued to decline, making a new low for the move down today, despite the Dow Jones Industrial Average (DJIA) making a new all-time high this morning. Not every stock has popped to the upside in reaction to our unexpected election results late Tuesday night or early Wednesday.
In this daily chart of KO, below, we can see a seven-month pattern of lower highs and lower lows -- or the simple definition of a downtrend. The 50-day moving average line turned down in mid-May, and still has a bearish slope. The slower-to-react, 200-day moving average line is currently flat.
The On-Balance-Volume (OBV) line has been moving lower since July, signaling that sellers of KO have been more aggressive -- with heavier volume being traded on days when KO has closed lower. A bullish divergence is visible from August through October, as prices made lower lows but momentum made higher lows. This divergence means that the pace of the decline has slowed. Unfortunately it hasn't yet resulted in a reversal to the upside.
In this weekly chart of KO, below, we have mixed signals -- some bearish and some close to a reversal to the upside. KO has been trading below its flat, 40-week moving average line for the past three months.
The weekly OBV line has declined for the past four months suggesting liquidation. On the not-quite positive side is the Moving Average Convergence Divergence (MACD) oscillator, which looks like it is narrowing towards a cover-shorts buy signal.
Strategy: KO could slump further into the $40 to $38 area in the near term. A weekly close below $38 could do serious damage to the charts -- like this Point and Figure chart above -- and should be watched closely.