Starbucks, Alphabet Form This Bullish Pattern Ahead Of Federal Reserve Minutes

Zinger Key Points
  • Like Alphabet, Starbucks attempted to break up from its bull flag on Wednesday.
  • The measured move of Starbucks’ bull flag is about 20%, which suggests the stock could surge toward $114
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Alphabet, Inc GOOG GOOGL were trading higher on Wednesday ahead of the release of the Federal Reserve’s November minutes at 2 p.m.

The move was in tandem with the general markets, which saw the S&P 500 spiking 0.7% higher at one point in anticipation the Fed’s tone may turn less hawkish amid recent higher-than-expected jobless claims and lower-than-expected consumer price index data.

Starbucks Corporation SBUX popped up 1.6% higher at one point on Wednesday morning before giving back some of its gains.

Both Alphabet and Starbucks broke up from bull flag patterns on the daily chart. The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.

  • For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downward within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
  • Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.

A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.

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The Alphabet (GOOG) Chart: Alphabet’s bull flag was printed between Nov. 3 and Tuesday, with the pole formed over the first nine days of that time frame and the flag created over the trading days that have followed.

On Wednesday, Alphabet broke up from the flag formation but has been unable to gain momentum to do a quiet period in the general markets.

If Alphabet receives a positive reaction to the Fed’s minutes and bullish volume enters the stock, the measured move is about 20%, which suggests Alphabet could eventually surge toward $113.

If the stock receives a bearish reaction, Alphabet could fall back into the flag formation and under the eight-day exponential moving average (EMA), which could negate the pattern.

Alphabet has resistance above at $97.79 and $101.08 and support below at $94.82 and $89.62.

Starbucks’ bull flag was also printed between Nov. 3 and Tuesday, with the pole formed over the first eight days of the time frame and the flag formed over the days that have followed.

The measured move of Starbucks’ bull flag is about 20%, which suggests the stock could surge toward $114. If Starbucks reacts bearishly to the upcoming news, it could also fall under the eight-day EMA and negate the flag pattern.

Starbucks has resistance above at $99.15 and $104.02 and support below at $93.83 and $90.97.

Photo via Shutterstock.

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