It’s been some time since Starbucks Corporation (NASDAQ:SBUX) has rung the register for investors, but that could changing shortly. A long technical brewing period is looking ready for bullish SBUX stock traders to place a spread order off its options menu. Let me explain.
After a long slumber, SBUX stock is waking up on and off the price chart from the sometimes bandied about “restaurant recession” narrative. In Thursday’s session, shares hit a fresh 52-week high along with the broader market, as Starbucks tacked on 1.63% to finish at $63.01.
Unlike the S&P 500 or Nasdaq, though, SBUX stock is showing a good deal less steamy froth despite its all-time-high being within spitting distance. As well, shares are up a less-than-hot 5% over the past year as compared to impressive gains of around 16% and 26% in the S&P and Nasdaq, respectively.
So is it finally time for Starbucks investors to buy into a different sort of loyalty program once more? Could be. While the company’s most recent earnings confessional wasn’t exactly blistering hot, earnings of 45 cents per share did match views. Quarterly sales for SBUX stock also grew by 6% from the year-ago period on revenues of $5.3 billion. Sales were actually shy of Street forecasts of $5.42 billion, but other positive trends have been building.
Starbucks key mobile payments platform accounted for 29% of U.S. transactions and was up 5% from the year-ago quarter. As well, the company’s My Starbucks Rewards program grew by 11%.
And then there’s that Starbucks stock price chart and one suggesting that being in the SBUX stock loyalty program is about to pay something other than just dividends to investors.
SBUX Stock Weekly Price Chart
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The lengthy percolation period, for lack of a better description, is now ready for bulls to purchase SBUX stock based on a healthy breakout.
The above-average volume breakout exited a handle consolidation stationed above two mid-pivots and the 62% retracement level of the larger cup base. Irony aside, the pattern is a classic and should continue to draw interest from bullish traders.
SBUX Stock Bull Call Spread Strategy
Considering the overall bullish view for SBUX stock and after reviewing the options board, I like the idea of approaching shares with a simple bull call strategy. Specifically, the July $62.50/$65 call vertical is reasonably priced at $1.10 mid-market with shares of Starbucks at $62.95.
Using a vertical with decent, but not too much time, reduces risk and better positions for a breakout in SBUX stock.
Bottom line (or maybe top line), if there is some froth beyond the top of the cup pattern, it would take a fairly modest gain of 3% by expiration to ring the register and enjoy cashback of $2.50 for a profit of $1.40 and return of 127%.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
