Trade of the Day: Starbucks (SBUX)

Starbucks rises as workers gain confidence

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Starbucks (NASDAQ:SBUX) has rebounded from its pullback last week, and it registered its highest close in months on Wednesday. We expect this bullish trend to continue into November.

The company is cyclical in nature, as we noted in our original analysis, and when we originally opened the position, SBUX was in the middle of a PR disaster. That delayed a new marketing strategy oriented toward promoting its My Starbucks Rewards (MSR) program. With that crisis now in the past, SBUX is benefiting from the recent rally.

The bullish news from the Bureau of Labor Statistics (BLS)’s Job Openings and Labor Turnover Survey (JOLTS) announcement was a major factor for this week’s rebound rally, as the BLS announced a record 7.136 million job openings in August and a near record amount of quits during the same period.

This means that there are more job openings than there are people looking for jobs (6.23 million in August, according to the Labor Department) and that workers are feeling more confident. Confident workers tend to spend more, and that means the economy — and stocks like SBUX that benefit from consumer spending — will typically perform better.

We have been able to “roll out” our bullish trades on SBUX several times now, and as long as the company continues to benefit from the strong economy and growth in Asian markets, we like having a position in SBUX in our portfolio.

‘Sell to open’ the SBUX November 16th $57.50 Put Write (SBUX181116P00057500) for a minimum price of $1.10.

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