To receive further updates on this Starbucks (NASDAQ:SBUX) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of Strategic Trader today.
We are opening a new bullish trade on Starbucks (NASDAQ:SBUX). We successfully sold three put writes on Starbucks last year, and after the company’s recent earnings announcement, we would like to do it again.
A Strong Start to 2019
SBUX released its quarterly earnings last week, and beat Non-GAAP earnings estimates by $0.10 per share and revenue estimates by $140 million — coming in at $0.75 per share and $6.63 billion, respectively.
Management also raised its outlook for the fiscal year from $2.61 – $2.66 to $2.68 – $2.73. These positive announcements caused SBUX to gap higher on Friday, completely erasing the bearish pullback the stock suffered on Thursday in the run up to the earnings announcement that came out after the closing bell.
The company is experiencing global comparable store sales growth of 4% and added 541 net new stores during the previous quarter. We expect this growth rate to continue. Coupled with a strong dividend, these fundamental factors should keep pushing the value of the stock higher.
$65 Resistance is Now Support
Looking at the chart, $65 served as a resistance level in late December and early January and then served as support on January 24 as the stock dipped before the earnings announcement.
Daily Chart of Starbucks (SBUX) — Chart Source: TradingView
We anticipate this price level is going to continue to hold as support during the next month. That’s why we think it would be a good strike price for a put-write trade.
We don’t anticipate having this stock put to us, but because the fundamentals are so strong, we wouldn’t mind having SBUX back in our portfolio if the stock does dip in the short term.
To find out which SBUX puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.
Follow our Facebook page to receive each Trade of the Day direct to your News Feed — and join the conversation.
