Let's perform a post-chart analysis for Starbucks (SBUX) after its most recent earnings report. The Starbucks (SBUX) chart analysis in this article will build off my previous article for the company.
In my previous stock article for SBUX, I illustrated a Bullish Impulse wave pattern that had completed and was in the process of correcting. I thought it was in a Wave B of some sort of corrective wave pattern.
Here is a quote of mine from that previous article
If you are long shares of Starbucks currently, the overhead resistance area represents a higher probability trading area. Trim some of your long shares as SBUX's share price reaches the overhead resistance area ($58.25 - $58.50 area). Repurchase those shares as the share price re-tests the low set by Wave A. The repurchase area would be the $53 - $55 area.
When I made that recommendation on January 8, 2017, SBUX's share price closed on January 6 at $57.13. Let's get an update on that article and see how Starbucks (SBUX) corrective wave process is shaping up.
Starbucks (SBUX) Chart Analysis
This first chart is a 1 year daily candlestick chart. This Starbucks (SBUX) chart analysis is using Elliott waves. The chart has a Bullish Impulse wave pattern illustrated. This is the same wave pattern I illustrated in my previous article for SBUX.
Take a look at my recommendation to sell shares in the $58.25 - $58.50 area. SBUX hit a high of $59 after my article before starting the predicted Wave C of a corrective Elliott wave pattern.
I placed the Fibonacci Extension Tool on Waves A & B to measure downside ending points for Wave C. SBUX is finding support around the top of Wave 1 from the Bullish Impulse wave pattern. The top of Wave 1 is statistically the most probable pullback area in the development of a possible larger uptrend.
The MACD Histogram on the above daily chart just started to show a decrease in selling momentum. This is an indicator that the bottom could be in or near. If you look back a few months to May 2016 on the chart though, I pointed out how a divergence can still form and bring share prices lower even as the MACD Histogram continues with decreasing selling momentum.
There was a lot of selling volume during the last 2 weeks. Because of this amount of selling volume, waiting for 2 or 3 consecutive decreases in the MACD Histogram indicator should be taken into consideration. Look for a possible bullish reversal candlestick pattern after those consecutive decreases in selling momentum.
That increase in selling volume may cause SBUX's support at the 100% Target Line from the Fibonacci Extension Tool to fail. If it does look for the Golden Ratio of the trend. In this case, that would be the 161.8% Target Line and the $51.71 price area. If there is a temporary break below the $51.71 level and it prints a $50.83, that would be bad from an Elliott wave perspective.
A failure below the $50.83 price level would not represent an immediate buying opportunity. Rather, it would be the middle of the current downtrend that is about to get uglier. That is why a stop-loss at $50.83 would be in order for this trade.
SBUX - Moving Average Analysis
This is a 1 year chart again but with moving averages overlaid on the candlesticks.
One of the scale-in trading strategies that I've discussed before is to make a scale-in purchase on the 1st pullback and break below the 200 Day moving average after the development of a Golden Cross moving average pattern.
One additional pullback would mean that SBUX's share price fails at retaking the 200 Day moving average immediately. It would rise up to it and then bounce back down for the final push of the probable correction.
If SBUX's share price retakes the 200 Day moving average line and closes above it for a couple of days, a pullback to the 200 Day at that point is the opportunity to make the scale-in purchase. A break above the 200 Day would most likely find immediate resistance at the 20 Day on the above chart. The pullback from the 20 Day on light selling volume is the scale-in opportunity.
SBUX - Thrusting Support
This is a 3 year weekly candlestick chart for Starbucks (SBUX). There has only been one temporary close below the support area from the Thrusting candlestick pattern. I would anticipate one more possible re-test of that support area before SBUX attempts to rebound towards its previous high of $64.
After a year of decreasing selling momentum for the MACD Histogram, there was even some buying momentum that recently percolated.
A break below the support area from the Thrusting candlestick pattern will most likely land SBUX's share price at the red 161.8% Target Line from the Fibonacci Extension Tool on the above chart. The red 161.8% Target Line resides at the $47.21 level.
Make sure there is not increasing selling momentum as the $47.21 area is reached. If there is, it may not be the buying opportunity you are looking for in the short-term.
Starbucks (SBUX) Chart Analysis Summary
For those that want to be long shares of Starbucks (SBUX), opportunity could be near. It involves some risk, so using a tight stop-loss for the trade may be in order.
The stop-loss amount would be $50.83; all purchases to go long would obviously be made above that price.
Monitoring my previous Starbucks (SBUX) chart analysis would have paid off dividends. Any shares sold in my recommended range could now be purchased approximately 10% lower.
Here is a quote from the summary from my previous article.
During this pullback, expect a re-test of Wave A's bottom. If you see a possible price reversal taking place above the bottom, a scale-in purchase can be made. If you were a little early and the share price then pushes below Wave A's bottom before rebounding, another scale-in purchase can be made at this lower level. Save the last 1/3 scale-in purchase once the new uptrend appears to be firmly in place.
The initial upside price target for any Starbucks share purchased is its previous high of $64. There can be upside potential after that as well, but the let's worry about getting SBUX's share price back up the the $64 area first.
Based on that quote, you may be 1/3 into a long position now. Wait to see if a pullback to the $51.70 area develops. If it does, another 1/3 scale-in purchase can be made as long as the MACD Histogram is not showing increasing selling momentum on any chart and there is not an increase in total selling volume.
The last 1/3 scale-in purchase would be held in reserve for the time being. Don't forget to set that $50.83 stop-loss for this trade.
If you have any questions as the trade is setting up, head into the Idea Chamber and ask your questions!!
Good luck trading.