Starbucks Rallies But Can the Surge Continue?
The coffee giant has enjoyed rising stock prices but investors should question whether the gains can continue.
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On Tuesday night, Starbucks SBUX reported a Non-GAAP EPS of $0.93 which was only in-line with estimates and revenue of $9.1 billion, which missed by $150 million. The company outlined new strategic partnerships and "green shoots" in the U.S. business.
Let's get a grande and check out the charts and indicators.
In this daily bar chart of SBUX below, I can see that prices have been on a downward trend since November. Prices made a low in May and a retest in July. Prices are trading higher in the pre-market Wednesday and testing the 50-day moving average line. The slower-to-react 200-day moving average line still has a negative slope and intersects up around $89. The On-Balance-Volume (OBV) line shows weakness the past 12 months and tells me that sellers of SBUX have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line.
In this weekly Japanese candlestick chart of SBUX below, I can see a mixed picture. Prices are in a longer-term downtrend and trade below the declining 40-week moving average line. The candles are showing some lower shadows below $75 as traders reject the lows. The OBV line shows gains from a low in late May suggesting a shift from aggressive selling to aggressive buying. The MACD oscillator is below the zero line but we may see a cover shorts buy signal in the weeks ahead.
In this daily Point and Figure chart of SBUX below, the software is projecting a downside price target but today's rally has not been plotted yet. A trade at $79.84 should start to improve this chart.
In this weekly Point and Figure chart of SBUX below, I can see a downside price target in the $60 area but that could change.
Bottom line strategy: I am not too excited about SBUX's results with same store sales in China down by 14% last quarter. Maybe I am missing something, but I will continue to get my coffee fix at home.
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