Coca Cola Can Disappoint in Next Couple of MonthsBecause a company is a household name doesn’t make it immune to market declines. Coca-Cola stock fell from ~$60 to as low as $36 a share in roughly a month during the 2020 Coronavirus crash. That is about 40% decline, fortunately for the bulls, was followed by a recovery to approximately $55 by the end of the year.
Is this a good time to join Coca-cola bulls?
The daily chart above makes it possible to analyze KO’s structure from its $60.09 top from an Elliott Wave perspective. The sharp decline to $36.20 can be seen as a five-wave impulse, labeled 1-2-3-4-5 in wave (A). The EW theory states that a three-wave correction follows every impulse, before the price resume in the direction of the impulse.
Another 40% Plunge Threatens Coca Cola Investors
That three-wave correction fit in for the advance from March 2020 low. The corrective rally in Coca-Cola stock looks like a triple zigzag, labeled as W-X-Y-X-Z. If this count is correct, the bearish reversal from $54.92 high is the beginning of wave (C) down. (C)-waves usually breach the ending point of the corresponding wave (A). This means bearish targets below $36 a share are highly probable as long as the price stays below wave (B) high.
Besides, the stock has broken out of major correction trendline and made a short-term impulse-corrective cycle, labeled 1-2. Just like there was a massive sell-off in wave 3 during the COVID-19 plunge, it makes a lot more sense for the price to go down rapidly the same way in wave 3 of (C).
In my opinion, there are plenty of reasons to prepare for a drop to the low $36 in the months ahead.
What's your view on Coca-cola? Let me know in the comment.
Thanks for reading!
Veejahbee.
