PepsiCo Stock Looks Oversold – Is a Short-Term Rebound Coming?

PepsiCo Stock Looks Oversold – Is a Short-Term Rebound Coming?

PepsiCo (NASDAQ: PEP) appears to be oversold in the near term, based on its monthly chart. The stock closed last week at approximately $143.38 per share, marking a decline of over 25% from its all-time highs. This downward trend puts PepsiCo on track for its sixth consecutive losing month, a streak not seen since the 2008 financial crisis.

Key Technical Levels to Watch

Examining the PepsiCo stock chart, the price has returned to the 100-day moving average (100MA) after a brief bounce last month. Notably, this aligns with long-term trendline support dating back to January 2009.

Oversold Technical Indicators Signal Potential Rebound

A deeper dive into PepsiCo's technical indicators suggests that the stock may be approaching a reversal:

• MACD (Moving Average Convergence Divergence): The MACD is at its most oversold level since the 2008 crash, indicating extreme downside pressure.
• RSI (Relative Strength Index): The RSI currently reads 33, close to the 31 reading recorded at the lowest point of the financial crisis, hinting that further downside is possible but limited.
• Stochastic Oscillator: The stochastic indicator has entered oversold territory. Historically, PepsiCo stock has rebounded after reaching similar levels on three prior occasions.

Short-Term Bounce or Further Decline?

Based on this technical analysis, there is an increased likelihood that buyers may step in for a short-term bounce at current levels. However, a decisive breakdown below the 100MA and long-term trendline support could invalidate this bullish thesis.

If a strong breakdown occurs, panic selling may drive the stock lower, potentially testing key support levels at $130 and possibly even the COVID-19 lows near $115.

Conclusion: Is Now the Time to Buy PepsiCo Stock?

PepsiCo's oversold conditions, historical support levels, and past technical patterns suggest that a reversal may be near. However, traders and investors should monitor the 100MA and trendline support for confirmation. A strong bounce from these levels could present an opportunity for short-term gains, while a breakdown could lead to further downside risks.