Oversold Stock of the Day: Coca Cola Co. (KO)
Beverage giant Coca Cola Co. (KO) has seen shares get slammed nearly 10 percent in recent sessions. That’s a big move for the company, and it’s also bringing shares to oversold levels.
While the stock’s relative strength index, or RSI, is still just out of oversold territory, shares have now closed a gap higher that occurred in early November when the overall stock market jumped higher.
Shares are also now trading well under their 50-day moving average, a spot where the stock usually bounces. Given that shares gave off a golden cross indicator back in October, the long-term trend for shares is still up. However, it’s clear that shares got too far ahead of themselves after jumping higher in November.
Action to take: Shares may still have a few weak sessions ahead, but it’s nearing the end of a modest decline. Traders can take advantage of that with the March 2021 $50 calls. This at-the-money trade last went for about $2.00.
Traders should look for mid-double-digit gains as the share price stabilizes and starts to move higher in the coming weeks. A profit-taking opportunity may occur at the end of the month when the company next reports earnings, well ahead of the option’s expiry.