Counter Trend Long (Bullish) Trade Setup for Coca-Cola

6 мая 2020 г.

KO

Coca-Cola has been on a bearish trend since March April, though has had some short term bullish runs of a few dollars during that stretch. We are going to attempt to pick up some returns with a short term trade that will ride this cycle of ups and downs during a bearish trend. Before getting into the trade setup, let's look at what the chart tells us mentally decide to get into the trade.

What's been going on the last few weeks:
This trade is setup on the one hour chart, but going up to a higher time frame chart provides some supporting information. If we go up to the daily or weekly level, we find a major structure level around 44.24. This support level has been relative since 2013. It was most recently tested at market open on April 21. The market has regularly tested this support level and is the one we are hoping holds strong for this trade as well.

From April 21 to May 1, KO had a nice bullish run going from 44.24 to On May 4, KO hit a recent low-low around 44.68, but quickly rebounded to 47.84. After the double top, sellers won out and the price continued downward to 44.68 and rebound slightly into consolidation to 46.08 and closed May 5 down at 45.41.

The trade:
We are expecting or hoping for shares of Coca-Cola to come on down and retest the previous low of 44.24. This is the price where we will enter the trade.

We are expect or hoping for the price to rise, so we will set a stop limit at a price lower than our entry price. We've created a kill zone, by looking left on this chart and higher time frame charts to see where structure is sustained. If the market price reaches the lower end of the kill zone, we believe the price of Coca-Cola will continue bearish and we will exit the trade. In this case, we've setup the stop limit at 43.95, just outside the kill zone to give the market to continue down after our entry price. We must be prepared to accept this loss if it occurs. 44.24 - 43.95 = .029 per share as a guaranteed minimum loss if this occurs (could be more depending on where the limit order is filled by your broker).

We will set to limit targets on this trade - these are points where we will cash out our profits and exit the trade. Target 1 will be set at the previous level of consolidated structure - on this chart, we've determined that is around 46.08. When the market reaches this point we will sell 50% of the shares that were bought. Target 1 is setup on a 1.92 risk-reward ratio. Our potential profit is calculated as 46.08-43.95 = 1.40 per share. When Target 1 is met, we will roll our stops to the entry price or setup a rolling stop.

Target 2 we've set at a higher previous structure level. In the case Coca-Cola gets a nice bullish run, we would like to take advantage of it. We will set Target 2 at the hourly close (near the double top) at 47.66. Once target 1 is achieved and the stops are rolled up, this is now a risk free trade with the potential of even more gains. Target 2 is setup on a 4.08 risk-reward ratio. Gains would be 47.66 - 44.68 = 2.98 per share.

General Comment
I'll be entering this trade in the trading view papermoney trader. Play along, let's see where this one plays out.
All this is my first public idea, please let me know what you think.
What do you think Coca-Cola stock will do?



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6 мая 2020 г.

Заметка

Just noticed my description prices may have some typos and been confusing. To clarify this summaries various position prices:

Entry : 44.68
Target 1 : 46.08
Target 2 : 47.66
Stop : 43.95

13 мая 2020 г.

Сделка закрыта: достигнута тейк-профит цена

This was a profitable trade. Target 1 was met. Stops were rolled to break-even and were later activated to close the trade.

Successful completion of Target 1.
Stopped at break even.