Jim Cramer went through the first 10 alphabetical names of the 30 stocks that make up the Dow Jones Industrial Average in his opening Real Money column here on Tuesday. He said Coca-Cola Co. (KO) is "a buy, plain and simple".
"I think investors will flock to Coca-Cola as a safe haven because it's a classic defensive stock that does just fine in a slowdown. Right now it's at $52 -- if you can get it for less than $50 that's a gift," Cramer said.
Let's check out some simple charts and indicators for Coca-Cola, which is our Stock of the Day at Real Money.
In this daily bar chart of KO, below, we can see that prices have found some buying interest around $52 in November and that area may attract buyers again. A lot of technical damage can be seen on this chart in just the last three weeks. Prices are below the declining 50-day moving average line and below the cresting 200-day moving average line. Trading volume has been heavy in recent days and weeks and the On-Balance-Volume (OBV) line has weakened since the middle of February. The trend-following Moving Average Convergence Divergence (MACD) oscillator has quickly turned from bullish to bearish as it fell below the zero line.
In this weekly bar chart of KO, below, we can see how many times the $52 area has acted as support over the past nine months or so. KO is below the cresting 40-week moving average line. The weekly OBV line has only turned neutral in recent weeks and that is a positive. Most of the stocks I have looked at in recent days show signs of more aggressive selling, but not KO. The MACD oscillator has crossed to a take-profits sell signal
In this Point and Figure chart of KO, below, we can see two things. First, it is easy to see that a trade at $51.02 will be a new low for the move down on this chart. A new low would refresh the downtrend and could open the way to the second point -- a potential downside price target of $45-$44. The broad market is sharply higher in the pre-market Tuesday, so maybe further weakness will not be seen. Maybe any further price weakness will be bought aggressively; we should find out quickly.
Bottom line strategy: Maybe KO will make a two-day price reversal -- a low close on Monday and then a high close here on Tuesday. I don't know what will happen, but KO could very well be a place to commit funds.
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