Can Dutch Bros Coffee Thrive in the Summer?
Shares in the coffee chain have percolated higher lately but it might not last.
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Coffee chain Dutch Bros Inc. BROS has percolated higher in the past few months but the upside price momentum has weakened and soaring temperatures are making me dream about ice cream and not caffeine.
Let's get some to-go cups and check out the charts of BROS.
In this daily bar chart of BROS below, I can see that prices have moved higher since making a low in late September/early October. Prices trade above the rising 50-day moving average line and above the rising 200-day moving average line. The trading volume has been very active since late February. The daily On-Balance-Volume (OBV) line has been a very choppy affair and does not help to support future gains. The 12-day price momentum study shows that positive momentum has weakened from May to June to July even as prices made new highs — this is a bearish divergence and could foreshadow weaker prices in the weeks ahead.
In this weekly Japanese candlestick chart of BROS below, I can see the last three years of price action. Prices are trading above the rising 40-week moving average line but the most recent candles could become part of a top reversal pattern. The trading volume has increased but may not be up to "breakout" turnover. The OBV line shows me an up and down pattern instead of a steady rise. The 12-week price momentum study does not show me a bearish divergence (yet) but we are likely to see a peak in this indicator very soon.
In this daily Point and Figure chart of BROS below, I can see an upside price target in the $50 area but a trade at $38 will start to weaken the picture.
In this weekly Point and Figure chart of BROS below, the software is projecting a price target in the $56 area. We'll see.
Bottom line strategy: Traders who may be long BROS should raise sell stops to $37.90.
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