Starbucks Corporation (NASDAQ: SBUX) seems to be poised for a price surge as per its latest charts. The company is an American multinational chain of coffeehouses and roastery reserves headquartered in Seattle, Washington. It is the world’s largest coffeehouse chain.
The stock was also a part of our watchlist for breakout stocks.
Bullish Indications
#1 IH&S Pattern Breakout: As you can see from the daily chart, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in purple color. An IH&S pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term. Currently, the stock has broken out of the IH&S pattern, indicating bullishness.
SBUX – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
SBUX – Weekly Chart
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently above 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of SBUX above the price of around $93.40.
TP: Our target prices are $100 and $105 in the next 3-6 months.
SL: To limit risk, place stop-loss at $89.50. Note that the stop-loss is on a closing basis.
Our target potential upside is 7% to 12% in the next 3 to 6 months.
For a risk of $3.90, our target rewards are $6.60 and $11.60. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the breakout level of the IH&S pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara