by Serge Berger | January 27, 2014 8:12 am
Coffee shop operator Starbucks (SBUX) reported a pleasant first quarter for fiscal 2014 last Thursday night, giving SBUX a pop last Friday that puts its charts at a critical near-term juncture.
Starbucks earnings came to 71 cents per share to top expectations by a pair of pennies, and that number was 25% higher year-over-year. Revenues of $4.24 billion were a bit shy of the consensus for $4.3 billion, but were nonetheless impressively improved, up 12% from the year-ago quarter. On the outlook front, SBUX lifted its 2014 guidance.
In terms of growth, Starbucks opened 417 stores in the quarter and now has more than 20,000 stores worldwide. What’s furthermore interesting is that stores in Asia Pacific and China are now double (4,000) than those in Europe (2,000), which is a statement to the strong demand in Asia.
Starbucks further stayed the course with its share repurchase program, and after repurchasing 600,000 shares of SBUX stock during the fist quarter, it has another 26 million shares to repurchase in the current program. At the margin, that should keep Starbucks stock from falling too far in the medium term.
Best of all, despite a significant selloff in the broader market Friday, SBUX stock rallied 2.2% on the day.
Before considering the daily chart, let’s first understand the weekly multiyear perspective on the below logarithmic chart.
For longer-term charts, I always look at both the arithmetic (i.e., normal chart) as well as a logarithmic one to see which one gives better longer-term support and resistance levels. In the case of SBUX stock, the logarithmic chart currently shows that it remains somewhat elevated and trading above the 2010 uptrend. To me, this simply means that a better mean-reversion move would take SBUX stock back toward the blue uptrend line, and that currently would mean that shares have another 10% or so of downside potential before reaching a better medium-term support level.
On the daily chart, SBUX stock traced out a minor double top in November, which then led to its 2013 trend break in early December. Note that as a result, SBUX stock touched its 200-day simple moving average (red line) last Thursday for the first time since late 2012, but promptly rejected it with an intraday bounce. Friday’s rally closed off the highs of the day, and left SBUX hanging right in between its 100- and 200-day MAs.
Bottom line: In the immediate term, I see little to do in SBUX stock, but would consider it from the short side for a quick trade if it can break below the 200-day MA.
Otherwise, Starbucks is best left alone here until it can build a better base from which to push higher from again. And I suspect this largely depends on how long the correction in the broader market takes to run its course.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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