June has been good for Coca-Cola Co (NYSE:KO).
The price of the stock has risen by 10%, but if this stock is not in your portfolio is now the time to buy?
For now, I would recommend standing aside and waiting for further confirmation of bullishness before adding this stock to the portfolio and here is why.
First, the stock is still trading 7% below its current all-time high, a reason to apply patience as the high of the stock is a resistance level.
The price of Coca-Cola may recover to this level but then be forced back down by those dumping the stock. Stocks trading around previous all-time highs tend to cause panic in the market. A short-term reversal in the market then ensues where losses can occur or you end up with a stock you cannot sell, often due to emotional reasons instead of a well-thought-out exit management system.
Below is the daily timeframe.
Second, the market as a whole is still going through a correction and there is potential further downside movement. If further weakness happens, then Coca-Cola may also be dragged further down.
For me to consider Coca-Cola, I would want to see the following:
• Coca-Cola to printing new all-time highs.
• The S&P 500 trading above the daily 200 simple moving average.
See Also: S&P 500 Up 7%. Is Now The Right Time To Buy Stocks?
This will give me the right high-probability environment I require to be confident that Coca-Cola will go on to return me a profit and do it quickly. It will also give the right environment to compound and accelerate the profit phase.
Right now I am in capital protection mode. This will change to profit mode when the S&P 500 dictates the right market conditions.
Patience for now.
Photo: Tetiana Shumbasova via Shutterstock
