Trouble Is Brewing For Starbucks Unless The Stock Holds This Key Level: What To Watch

Starbucks Corporation SBUX gapped down 2% on Friday and fell another 4.5% at one point intraday after Baird lowered its price target on the multinational coffee house chain from $126 to $116.

On Wednesday, Starbucks’ EVP Chief Partner Officer Angela Lis dumped 6,000 shares at an average price of $116.88 for a total of $701,280.00. When insiders sell the stock of the company that employs them, it can spook investors because it can be seen as a sign that that the people closest to the company don’t believe the share price will go higher.

Starbucks may be entering into a turbulent time — at least in the U.S. — as workers from various parts of the company continue to push toward unionization. On Dec. 9, employees at a Buffalo-area store became the first to vote in favor of unionizing, and on Monday employees at two locations in Boston and Brookline, Massachusetts requested votes to join Workers United.

The Starbucks Chart: Starbucks hit an all-time high of $126.32 on July 23 and then entered into a steep downtrend, which brought the stock to a low of $104.02 on Oct. 29. The stock then quickly bounced back up above a key support and resistance level at $108.88 and has spent the last six weeks trading between that level and a higher resistance level at the $117.57 mark.

On Friday, Starbucks briefly fell below the key level but bulls came in and bought the dip, which popped the stock back up above the area. If Starbucks closes the day below the $110 level, however, it will print a bearish kicked candlestick candlestick pattern, which could indicate Starbucks will trade lower on Monday and lose the support near $108.

If Starbucks falls lower on Monday, the stock will be in for at least a bounce because another bearish day will cause the stock's relative strength index to approach the 30% level. When a stock’s RSI nears or reaches the 30% level it becomes oversold, which can be a buy signal for technical traders.

There are three gaps above on Starbucks’ chart that are likely to be filled at some point in the future because gaps on charts fill about 90% of the time. The closest gap falls within the $111.80 to $113.22 range, the second gap is between $117.47 and $118.36 and the higher gap is up between $123.37 and $124.25.

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• Bulls want to see big bullish volume come in and push Starbucks up to close the day above the $110 level, which would cause the stock to print a bullish hammer candlestick. Starbucks has resistance above at $111.05 and $113.86.
• Bears want to see sustained big bearish volume force Starbucks to close the day below the key level or for bearish momentum to follow through on Monday to knock the stock under the level. There is support below at $106.78 and $104.94.