Coca-Cola Co (NYSE:KO) gapped down on Monday and continued to sell off about 1.8% amid overall market weakness, despite trying to bounce when the market opened.
The beverage company is set to print its second-quarter earnings Wednesday morning but as of Monday, it didn’t look like the stock was about to run up into the event. When Coca-Cola reported its first-quarter earnings on April 19, it reported sales of $9 billion, which beat the consensus estimate of $8.61 billion and earnings of 52 cents per share, 4% higher than the 50-cent estimate.
The stock inclined over 5% higher in the months following that report but topped out at $56.68, just over 6% below its February 2020 all-time high of $60.15.
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The Coca-Cola Chart: Coca-Cola's stock shot up 5.49% between July 7 and 16 before entering into consolidation on the daily chart. The rise created the pole of a possible bull flag and the decline Friday and Monday could be setting up the flag formation. For the bull flag pattern to hold Coca-Cola's stock should hold over the eight-day exponential moving average (EMA) and not decline more than 50% the length of the pole.
Coca-Cola is trading over the eight-day and 21-day EMAs and on Monday the eight-day EMA was acting as a support level for the stock. The eight-day EMA is also trending above the 21-day EMA, which is bullish. Coca-Cola is also trading above the 200-day simple moving average, which indicates overall sentiment in the stock is bullish for the long term.
Bulls want to see Coca-Cola's stock continue to hold above the eight-day EMA and within the flag formation. If the stock continues to trade within the flag on Tuesday, an earnings beat could propel Coca-Cola up through the top of the flag and above a resistance level near the $57 level.
Bears want to see Coca-Cola lose support of the eight-day EMA and for big bearish volume to drop it down toward the $55 level. A loss of support at $55.14 would negate the bull flag and a close below it could force the stock to drop down and test support at $54.
KO Price Action: Shares of Coca-Cola traded down 1.8% to $55.38 at publication time.