Starbucks Stock Shows Relative Strength To S&P 500: Here's What To Watch

Zinger Key Points
  • Starbucks was working to print a bullish kicker candlestick, which could indicate higher prices for Thursday.
  • Bullish traders want to see the stock regain the 200-day SMA as support.

Starbucks Corp. SBUX shares spiked more than 3% on Wednesday in tandem with the S&P 500, which was trading up about 0.8%.

The rise on Wednesday was caused by continued momentum in the stock after Starbucks closed Tuesday’s session up almost 2%. The rise on Tuesday was in opposition to a .41% decline in the S&P 500, indicating Starbucks was showing relative strength.

After the market close on Sept. 1, the company named Laxman Narasimhan CEO, which caused the stock to jump 2.88% the following trading day. Although the initial reaction to the news was bearish, investors may have gained confidence in Narasimhan after Bank of America analyst Sara Senatore's positive take.

Senatore also reiterated her Buy rating and $109 price target for the multinational coffeehouse chain.

On Wednesday, Citigroup analyst Jon Tower also weighed in on Starbucks. Tower maintained a neutral rating on the stock and raised the price target from $90 to $94.

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The Starbucks Chart: Starbucks gapped up slightly to start the trading day on Wednesday. The gap left below is small and unlikely to concern bullish traders.

There is a gap above up to $98.48. However, that is likely to be filled in the future because gaps fill about 90% of the time.

Bearish traders who aren’t already in a position will likely want to see the upper empty trading ranged filled before possibly going short. Bearish traders can watch for Starbucks to print a bearish reversal candlestick, such as a doji or shooting star candlestick, near the upper range of the gap.

If Starbucks closes the trading day near its high-of-day price, the stock will print a bullish kicker candlestick, which could indicate higher prices will come again on Thursday.

If the stock runs into sellers and closes the trading session with an upper wick, the stock will print a shooting star candlestick, which could indicate a retracement is on the horizon.

See Also: Starbucks (SBUX) – New Starbucks CEO To Focus On Unions, Pay And Benefits As Part Of 'Reinvention' Plan

  • If Starbucks is able to fill the upper gap, the stock will regain the 200-day simple moving average (SMA) as support — at least temporarily. If Starbucks is able to remain above the level, a bull market could be in the cards although bullish traders will want to see the 50-day SMA eventually rise up and cross above the 200-day.
  • Starbucks has resistance above at $90.97 and $93.83 and support below at $86.61 and $82.37.
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