The name of the game for today’s three big stock charts is “breakout”. The market is slowly turning into a stock picker’s game as the major indices are putting traders to sleep. In these cases, it always pays-off to find where the volatility trades are happening for opportunities.
Today there are a larger number of S&P 500 companies that are seeing upside volatility, indicating potential short-term bullish plays. Among the names on our list this morning are Starbucks Corporation (NASDAQ:SBUX), Mastercard Inc (NYSE:MA) and International Paper Co (NYSE:IP).
Starbucks Corporation (SBUX)
You don’t have to be a fan of paying $8 for your morning cup of Joe to figure out that Starbucks still rules its domain. The coffee giant boasts lines in their stores and drive-throughs all day long making SBUX a stock that Peter Lynch’s “Walk Down Main Street” approach would love.
The analysts at Stifel love Starbucks too as the firm upgraded the stock to a buy this morning causing a surge in buying activity.
The charts show that today’s move takes SBUX above its top Bollinger Band on heavier volume, suggesting that a breakout is occurring. The question, as always, is will it continue?
According to the charts, “yes”. Besides breaking the volatility bands, Starbucks shares are now breaking above $59, a price that has served as chart resistance dating back to July of 2016. Breaking above this range is also going to attract new money.
Momentum is building, but the short-term may see a little profit-taking since SBUX stock has been range-bound for so long. Watch for the stock to grab support at $59 and then use that price as a launching pad for a run higher.
Mastercard Inc (MA)
Unlike Starbucks, Mastercard shares have been in a very nice, low volatility rally since July of last year. Year-to-date, MA stock is returning 9% while the market is around 10.6% so the stock has been a consistent relative strength leader.
Today’s price movement takes Mastercard stock above its top Band as traders are increasing their bid on slightly above average volume. MA stock is a few weeks away from earnings, which may indicate that we’re going to see a “buy the rumor” rally on the shares.
The low volatility rally has allowed Mastercard shares to avoid working themselves into an overbought situation. This means that we are less likely to see profit-taking on today’s lurch higher and more likely to see traders start to pile on to the bandwagon.
In general, $113 has been some chart resistance, but not enough to think that MA shares will find their way back below. Instead, the upside volatility is more likely to shift the target to $120 over the intermediate-term.
International Paper Co (IP)
Paper is boring, right? Not today. International Paper broke above its top Bollinger Band yesterday and today’s activity confirms that the stock is in the midst of a volatility rally.
A technically oversold signal from IP stock helped to initiate the move, but there are also some fundamental reasons as RBC Capital raised its price target on the stock, giving traders another catalyst.
Material stocks in general have been beaten down of late after the “Trump Rally” gave them a shot in the arm. The recent profit-taking is opening opportunities on companies like International Paper.
A final technical note on IP is that the stock’s move returns it above its 50-day moving average after bouncing from chart support at $50. This puts the stock back on the bullish radar of technical traders and a target of $57 from our technical models.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.