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by Arthur Hill
Coca-Cola has consolidated the last few months, but volume and momentum favor an upside breakout.
Position: Accumulate
Arthur Hill
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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TRIANGLES
Coke Shows Some Fizz
09/09/05 07:39:21 AMby Arthur Hill
Coca-Cola has consolidated the last few months, but volume and momentum favor an upside breakout.
Position: Accumulate
| On the price chart (Figure 1), Coca-Cola (KO) formed a large triangle over the last few months (magenta trendlines). This is a neutral consolidation that is dependent on a breakout for a trading bias. The stock recently consolidated in the upper half of the triangle, with gaps in late August and early September. Both the gaps were filled, but the stock has lots of support at 43 and I would not turn negative unless KO breaks this level. |
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| FIGURE 1: KO. Coca-Cola formed a large triangle over the last few months (magenta trendlines). This is a neutral consolidation that is dependent on a breakout for a trading bias. |
| Graphic provided by: MetaStock. |
| Graphic provided by: Reuters Data. |
| |
| Upside volume has been outpacing downside volume over the last few weeks. In July and August, the stock surged on high volume (gray ovals). Volume on down days was considerablely lower, at least until September 8, when the stock closed below its prior close with above average volume. All was not lost, as a long white candlestick formed. This means that the stock opened on the low and closed on the high for the day. There was strong selling pressure on the open but buying pressure the rest of the day, and this was positive. |
| The moving average convergence/divergence (MACD) held in positive territory and recently moved above its signal line. In general, momentum favors the bulls when MACD is in positive territory and the bears when MACD is in negative territory. It is as simple as positive momentum and negative momentum. I am impressed that MACD held at the zero line, and the move above the signal line shows that the indicator is moving higher once again (green oval). Momentum is improving. |
| Despite the bullish bias in volume and MACD, the August-September consolidation holds the key to Coca-Cola. A break above the August high would break the upper triangle trendline and argue for higher prices. Conversely, a break below the August low (43) would break the last two lows and give the bears the upper hand. |
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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Date: 09/09/05Rank: 4Comment:
Date: 09/25/05Rank: 4Comment:
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