Shares of Coca Cola (KO.US) are losing more than 3% today and are trading at levels last seen in December 2021. The stock is currently losing the most of any company in the Dow Jones index and is down 15% year-to-date - the most since 2008 when it depreciated by 26.2%. General Mills (GIS.US) is also performing poorly today - shares in the cereal and snacks manufacturer have lost almost 25% since the start of the year and the same like Coca Cola, are trading at Q4 2021 levels.
- As there is no immediate news today to explain this scale of discounting in Coca Cola's shares (these are usually less volatile) - it can be linked to broader concerns about a hard landing of the US economy - bond yields continue to rise.
- Company's business, while stable and promising, also appears vulnerable to recession - if sales volumes fall, profits become entirely dependent on the prices achieved. Here, the upside potential seems to be limited by higher costs and a general disinflationary trend, in which a large part of the companies may gradually have to cut prices to achieve higher product demand. Coca Cola will report Q3 results on 24 October.;
Looking at the Coca Cola chart (KO.US) on the D1 interval, we see that the price has dived below the 200-session average (SMA200, red line) and has reached a zone where declines can potentially be halted by previous price reactions (marked by grey circles). If the price falls below $52 - the path to $48 and the 61.8 Fibonacci retracement of the March 2020 upward wave could be opened. Source; xStation5
