Is Pepsi Gaining Ground in the Coke War?

There are a lot of good things happening to PepsiCo Inc. (PEP) right now, after a couple years of extremely poor performance relative to both its peer group soft drinks ($DJUSSD) and then Coca Cola Co. (KO) more specifically.

Last week, PEP reported quarterly results that beat Wall Street consensus estimates as to both revenue ($22.73 billion vs. $22.39 billion) and earnings per share ($2.12 vs. $2.03), and the stock popped:

Enter PepsiCo Inc. (PEP)

But it's not just the fundamentals that were strong. Technical conditions have been improving over the past month or so.

While we saw a big earnings-related jump last week, PEP hadn't moved much off its mid-May bottom. However, its AD line (accumulation/ distribution) has been soaring, possibly indicating significant Wall Street accumulation.

It also has broken several key relative strength downtrend lines - one vs. its soft drink peers, and the other vs. KO. The latter is key, because that prior downtrend channel was nasty AND swift.

The first step for PEP was showing relative strength, which has been achieved. From here, it's all about holding onto the gap support levels annotated above during any period of weakness, while continuing to advance on both an absolute and relative basis.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.