It’s time to bet on Coke shares: Technician

With the Federal Reserve raising interest rates this week, Todd Gordon of sees one classic stock that could be primed for a breakout.

"2016 looks like it's a year of dividends in a slow interest rate increase environment," Gordon said Wednesday on CNBC's "Trading Nation." "To kick it off, we're going to try to play those utilities, those staples, those dividend players to the top side, and Coke looks ready to go."

One of the strongest sectors going into 2016 should be consumer staples, Gordon said. Within that group of names, Gordon said Coca-Cola's stock looks like it's about to break through previous levels of resistance at $45.

Coca-Cola shares, which currently pay a dividend of about 3 percent, have risen almost 3 percent this week, closing Thursday at $43.50.

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To capitalize on the expected outperformance, Gordon recommends using an options trade known as a call spread. Specifically, Gordon is buying the January 44-strike call and selling the 46-strike call for 50 cents total. This is a bet that Coca-Cola's stock is between $44.50 and $46 by January options expiration on Jan. 15.

"Coke has a pretty strong chart on the top side ready to break," he said. "I think with the interest into the dividend stocks, we are going to break through."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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