PepsiCo, Inc. (NASDAQ: PEP)

PepsiCo, Inc. operates as a food and beverage company worldwide. The company was founded in 1898 and is headquartered in Purchase, New York.

Take a look at the 1-year chart of Pepsi (NASDAQ: PEP) below with my added notations:

1-year chart of Pepsi (NASDAQ: PEP)

Over the past several weeks, PEP has created a key level of support at $114 (green). That line is also the “neckline” for the stock’s head and shoulders (H&S) reversal pattern. Above the neckline you will notice the H&S pattern itself (red).

Confirmation of the H&S would occur if PEP were to break the support, and lower prices would be expected from there.

The Tale of the Tape: PEP has formed a head & shoulders pattern. A long trade could be made at $114 with a stop placed below that level, but ideally, the pattern implies a short trade to be entered on a break below that level instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!
Christian Tharp, CMT