KO (Coke) looks ripe for a 3rd wave down.

It's been a long standing view of mine that the coming collapse will take down long time investing icons like Buffett.  Coke is one of his favorite plays but it is now ready for a big pullback.  In my previous model it looked like the plummeting had begun but it was just a retracement.  The weekly chart now has a pretty strong looking top in place, underpinned by W3 and then a higher high.

On the right zoom in is wave 1 down and then what is likely 2 back up.  That move back up was a 61.8% retracement which just filled the gap created by 3 of 1 down.  The could also just be A of 2 to be followed by a higher low into B of 2 and then C of 2 higher into mid January.  However, that is not my primary model even though I will be keeping an eye on it.

If anyone was thinking of buying put options on KO, now is the time.  Again, the best time for longer term options tends not to be the actual peak of wave 5 but rather at the extreme of wave 2.  I like the Jan 2017 $30 puts at the current price of about $1 (last bid ask):

30.00

KO170120P00030000

1.00

0.83

1.08

KO could hit $36-$37 in the coming 3rd wave down.  You could leverage up by pulling in the expiration to Jan 2016 by going for the $37 puts at just over $1.20.  I like the fact that the spread on these is pretty tight:

37.00

KO160115P00037000

1.21

1.20

1.26

For those who care about so called fundamentals, KO is overpriced by every metric.  Price to book is an outrageous 5.6 and PS is 4.  These are very high for a low (and now negative) growth company.  Of course, I don't think those numbers are why it will swoon.  I think that the herd got giddy on stocks again because of the use of leverage and everyone bought up Kant Miss KO because they wanted to be like  Buffett: all nice and safe and profitable.  I think there are too many people leaning on the port rail of an Asian ferry here...