Coffee retailing giant Starbucks (NASDAQ:SBUX) has traded in an almost freakishly orderly uptrend since the early 2009 lows in the broader market. In late 2011 and early 2012, the stock went vertical and traded above this longer-term trend, but eventually gave way to the laws of physics and corrected 30% in roughly three months, developing a solid bottom in early August 2012, right at the bottom end of the longer-term uptrend.
Since the latest rally off the August 2012 lows, Starbucks stock has again reached the upper end of the longer-standing channel and currently is only about 6% away from all-time highs set in April 2012.
Closer up on the daily charts, Starbucks continues to develop consolidation patterns that have a high probability of resolving to the upside. To be exact, SBUX currently is flashing a so-called bullish pennant formation, which as the name suggests, would resolve to the upside upon a breakout of the pattern. The level to overcome is near $59, and a break above there could work up to the all-time highs near $62 — good for a roughly 5% move. On the flip side, a break below $56.50 would be weak and a sign that more consolidation is needed before the stock can try retesting its zenith.
While the near-term setup has a bullish tone, it also has a marginally lower probability of working higher in the intermediate-term given that SBUX is already trading at the high end of its longer-term uptrend.
If and when Starbucks manages to retest its all-time highs near $62, the next question will be whether it can resume the uptrend past the all-time highs. Long-term holders of the stock are fully aware that it hasn’t move higher since April 2012, yet are hoping for the 2009-12 ascent to continue. How the stock reacts upon a successful retest of the highs will speak volumes as to how long it could take for the longer-term trend to continue higher.
Ideally, however, some churning near the retest levels of $62 will eventually lead the stock to a clear breakout higher.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.