Coca-Cola (KO) announced a major operational reorganization of its Americas business last Thursday. According to the press release, the company will split in to Coca-Cola North America and Coca-Cola Refreshments in order to streamline the re-franchising process to the independent bottling companies.
The two segments will be set up such that one handles the bottlers while the other remains in the traditional business. These changes are to go into effect on Jan. 1, 2014 and are clearly designed for the North American market, indicating that this type of setup may not be necessarily applicable for international markets. In terms of leadership, Coca-Cola North America will be led by J. A. M. Douglas, as Group President, reporting to Chairman and CEO Muhtar Kent.
The stock’s reaction on Friday was fairly muted as it closed higher on the day by just 0.05%, although it gave up a couple of intraday rally attempts. Because these changes are largely of operational nature, I have a difficult time seeing how analysts could justify any major up or downgrades of the stock in the wake of this news.
And while the news didn’t do much to KO stock on Friday, it did sell off almost 2% the day before, which brought it to a technically important support area on the daily charts.
Before looking at the daily charts however, let’s get an understanding of KO stock’s bigger picture from a technical perspective. First and foremost, KO stock has a great reference point at its 2009 up-trend, which it held like a champ until August of this year, at which point it sliced below the line. Since August, this line as acted as resistance as the stock’s re-test of the line’s underbelly in late November was rejected.
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From a multi-year perspective KO stock isn’t quite falling apart, but it is trading below important technical resistance. Which is to say that the odds are neutral for the medium term, but would improve if the stock can overcome the $40.50 area.
On the daily chart, courtesy of last Thursday’s selloff, KO stock now sits below its 200-day simple moving average (red line) and right at a confluence area of support near $39.25, made up of its 50- and 100-day simple moving averages (yellow and blue lines).
Aggressive traders can try to play a bounce off this immediate-term support area. However, from a trading perspective, as stated above, a move back above the $40 – $40.50 would offer better odds on the ling side. That would result in a move back above the 200-day moving average and past a diagonal resistance line dating back to June.
If and when this happens, KO sock would have medium-term upside into the mid-40s again.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
