When Starbucks Corporation (NASDAQ:SBUX) reported its latest earnings last week, Starbucks stock reacted negatively. But by the day’s end, SBUX had rebounded and closed higher despite a somewhat disappointing earnings report and outlook.
Through a longer-term lens, SBUX stock remains in a well-defined uptrend, but the price action over the past nine months has shares in a clear consolidation phase. The risk of another corrective move lower remains high.
For its fiscal third quarter, Starbucks earned 49 cents per share, which was in line with analyst expectations. Revenues came in at $5.24 billion, however, missing analyst forecasts for the third consecutive quarter. SBUX also revised lower its revenue guidance but raised the profit forecast. To yours truly, while earnings growth is nice to see, it’s top-line growth that really gets me excited. And given the still marginally slowing U.S. economic growth, it is difficult to see Starbucks really blowing the lid off in terms of revs for the time being.
As an important side note: This week will mark the busiest and arguably most important week for corporate earnings. However investors chose to react to these earnings will likely also have an impact on shares of Starbucks given their cyclical nature.
SBUX Stock Charts
On the multiyear weekly chart, we see that SBUX stock remains in a well-defined bull trend, which has major support at its blue 100-week simple moving average. Right now, that MA is currently in the low $50s.
Along this longer-term uptrend, Starbucks has had several pauses, each of which ultimately led to another surge in price. From that perspective, this most recent consolidation phase since last October is not much different except that we find ourselves very late in a U.S. stock market cyclical bull market. The major uptrend in SBUX stock would from this perspective not be broken until and unless a notable weekly close below the $50 area would take hold.
Moving on to the daily chart, we see that SBUX has well-defined support in the low $50s also from a horizontal support perspective (i.e., the black line which has served as support at least on a weekly closing basis for the past 12 months). The most recent rally in the stock off the late-June lows now has it back up near the red 200-day SMA, which as a reference point holds decent value for SBUX stock.
This area around the $58 mark — where this moving average currently comes in — also lines up with a 61.8% Fibonacci retracement from the lower highs in April measured down to the June lows.
All of this now allows active investors to clearly map out a battle plan.
A break and hold above the $58 area could see SBUX stock squeeze higher into the $61 area and begin filling the down-gap that I marked with the blue box.
Any notable bearish reversal from here however could set up a nice “fade the rally” trade, with Starbucks faltering back into the low $50s.
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