Starbucks Stock Grinds Into Consolidation, Looks Steaming Hot For A Move Higher

Earlier this month on CNBC, Ritholtz Wealth Management CEO Josh Brown called out Starbucks Corp SBUX as a top reopening play. He cited the company’s investments into technology and delivery as well as an increase in foot traffic as the reasons why he believes the stock will grow as the economy continues to open back up.

Starbucks sold off over 10% after making a bearish triple top pattern at its all-time high of $126.32 and entering into 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, Pros & Cons

The Starbucks Chart: After the triple bottom pattern was recognized Starbucks on Aug. 26 Starbucks’ stock shot up over 3% over the following three trading days. On Wednesday the stock gapped up slightly higher but immediately fell down to fill the gap but then popped back up over a support level at $117.57.

Tuesday’s move confirmed Starbucks is in an uptrend because it made a higher high over its Aug. 25 high of $116. For the uptrend to stay in tack, Starbucks will need to hold above the Aug. 26 low of $113.88.

Starbucks has a gap above that was left behind on July 28 following the company’s earnings print. Because gaps on charts fill 90% of the time, it's likely Starbucks will trade back up into the $124 range in the future.

After a big bullish day on Tuesday, in terms of both price action and volume, Wednesday’s action was taking place on relatively low volume which confirms 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 averages (EMAs) but the eight-day EMA is trending below the 21-day. Both EMAs have begun to curl upwards, however, indicating the eight-day will soon cross back above the 21-day EMA. Starbucks is trading above the 200-day simple moving average which indicates overall sentiment in the stock is bullish.

• Bulls want to see Starbucks either hold above support at $117.57 or create a bull flag slightly below the level over the next few days. The stock has another resistance level above at the $120.83 level and after that, there's not much resistance until the overhead gap.
• Bears want to see big bearish volume come in and drop Starbucks down below support of the eight-day and 21-day EMAs. If the stock loses the levels as support it could fall back down toward $114.62 and below the level there is a lower support at $112.75.