Earlier this month on CNBC, the CEO of Ritholtz Wealth Management Josh brown called Starbucks Corp (NASDAQ: SBUX) as a premier reopening game. He cited the company’s investments in technology and delivery as well as an increase in foot traffic as the reasons he believes the stock will rise as the economy continues to open.
Starbucks sold over 10% after hitting a triple bearish high at an all-time high of $ 126.32 and entered a downtrend. The stock then reversed course and formed a bullish triple bottom pattern near the $ 113 level.
See also: How to buy Starbucks • History, advantages and disadvantages
The Starbucks table: After the triple bottom model was recognized, Starbucks on August 26, Starbucks stock rose more than 3% over the next three trading days. The stock rose slightly on Wednesday, but immediately fell to close the gap, then climbed above a support level at $ 117.57.
Tuesday’s move confirmed Starbucks is in an uptrend as it peaked above its August 25 high of $ 116. For the bullish trend to continue, Starbucks will need to hold above the August 26 low of $ 113.88.
Starbucks has a gap on top that was left on July 28 after the company’s earnings were printed. Since gaps on the charts fill 90% of the time, it’s likely that Starbucks will return to the $ 124 range in the future.
After a big bullish day on Tuesday, both in terms of price action and volume, Wednesday’s action was on relatively low volume, confirming consolidation as opposed to exit volume. Bulls want to see any further consolidation continue on low volume to feel confident going forward.
Starbucks is trading above the eight-day and 21-day Exponential Moving Average (EMA), but the eight-day EMA is below the 21-day. However, both EMAs have started to curve upward, indicating that the eight-day EMA will soon revert above the 21-day EMA. Starbucks is trading above the 200-day simple moving average, indicating that general sentiment for the stock is bullish.
- The Bulls want to see Starbucks hold above support at $ 117.57 or create a bullish flag slightly below the level over the next few days. The stock has another resistance level above the $ 120.83 level and after that there isn’t much resistance until the overhead spread.
- The bears want to see a big bearish volume come in and push Starbucks below the eight-day and 21-day EMA support. If the stock loses the support levels it could fall back to $ 114.62 and below the level there is support below $ 112.75.