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Asset Watch
Wednesday, February 12, 2025
After Coca-Cola surpassed analysts’ consensus revenue and earnings estimates on Feb. 11, the stock rallied by nearly 5% and could be poised for a comeback. Moreover, with the seasonal clock shifting in its favour until the end of June, the beverage giant may be a wise way to play any Trump-induced volatility that hits in the months ahead.
Renaissance Macro Research noted on Feb. 11 that seasonal strength in the cyclical versus defensives ratio is coming to an end. In other words, while cyclical stocks often outperform defensive stocks (like Coca-Cola) in January and February, the latter group gains the upper hand in March, May, and June, with June being the best calendar month.
Consequently, Coca-Cola confronts a constrictive backdrop of solid earnings, strong seasonal trends, and potentially, robust momentum.
The horizontal white lines highlight Coca-Cola’s breakout zone, and the stock has cleared the first hurdle. However, resistance remains near $67, and Coca-Cola needs to close the week above the key level for confirmation.
As such, you should monitor the $67 area closely and look to pounce if the stock punches through the weekly resistance.
Another key indicator is the 5-week moving average. The blue line is often a meaningful support anchor during uptrends, and when Coca-Cola soared to an all-time high from July to September 2024, the 5-week MA provided support several times.
Thus, with the blue line turning up once again, it could help fuel a confirmed breakout above $67.
Because the battle will likely be won or lost between the 5-week MA and $67, you can plan your entry wisely. If a breakout occurs, it could be a good time to buy the stock. Conversely, if it consolidates in the short term, the rising 5-week MA will either push the stock above $67 or a breakdown will unfold.
Therefore, it may be beneficial to place an entry order near $68 to participate in a potential breakout, while continuously updating your stop-loss order as the 5-week MA rises.
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