PepsiCo Inc. ( PEP) is trading higher in the pre-market Wednesday as traders and investors react to a third-quarter earnings beat and increased guidance for the full year. Let's check the charts and indicators of the beverage and snack foods giant to see if this rally can be sustained in this weak stock market environment.
In this daily bar chart of PEP, below, we can see that prices have been weak since the middle of August. PEP is trading below the declining 50-day moving average line and below the declining 200-day line. Trading volume increased in September-October compared to August, telling me that traders voted with their feet and sold. The daily On-Balance-Volume (OBV) shows weakness from the middle of August as traders have been more aggressive sellers. The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this weekly Japanese candlestick chart of PEP, below, we can see that prices are below the cresting 40-week moving average line. The weekly OBV line shows a decline from early 2022. The MACD oscillator is crossing the zero line for an outright sell signal. The candles show a spinning top now but a bullish candle this week is needed for confirmation of a possible bottom reversal.
In this daily Point and Figure chart of PEP, below, we can see how the chart is positioned before the Wednesday bounce in the pre-market. Here the chart suggests a downside price target of $151.
In this weekly Point and Figure chart of PEP, below, we can see a downside price target of $151. A trade at $174 may be needed to turn this chart bullish.
Bottom line strategy: In this sometimes depressing market environment it is refreshing to see an earnings beat and a gap higher, but the bigger picture of PEP is not encouraging. Don't chase the strength in PEP.