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Starbucks Stock Grinds Higher Through Resistance: What's Brewing?

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  • SBUX

Starbucks Corporation (NASDAQ: SBUX) fell 8% following its fourth-quarter earnings print where the company reported an EPS beat but a miss on revenues. The stock has since erased all of its losses and on Friday was up more than 3%.

Following its earnings miss, the coffeehouse chain received a mixed response from analysts with some, such as Morgan Stanley lowering the price targets and others, such as Stephens & Co raising the target price.

Traders and investors used the sell-off of Starbucks' stock as an opportunity to buy the dip because on Oct. 29 Starbucks printed a bullish hammer candlestick, which indicated higher prices would come.

See Also: Stock Wars: Starbucks Vs. Coffee Holding Co.

The Starbucks Chart: Starbucks is trading over 11% higher than the Oct. 29 low of $104.02. On Friday, the stock looked to be printing a bullish kicker candlestick on the daily chart, which indicates higher prices may come again on Monday.

Starbucks smashed through a resistance level at $115.57 late Friday morning and looked to be heading toward an upper gap that was left behind on Sept. 15 between $117.02 and $118.36. Starbucks also has a gap below between $112.42 and $113.14. Gaps on charts fill about 90% of the time so it is likely the stock will trade into both ranges at some point in the future.

Technical traders may have seen the dip buying opportunity when Starbucks fell because the relative strength index (RSI) fell to the 30% level. When a stock’s RSI reaches or exceeds the 30% level it becomes oversold, which can be a buy signal for technical traders.

Starbucks is trading above the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA is about to cross above the 21-day, both of which are bullish indicators. Starbucks has also crossed back above the 50-day simple moving average (SMA), which indicates longer-term sentiment is bullish.

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  • Bulls want to see sustained bullish volume drive Starbucks up into the overhead gap. The stock has resistance above at $117.57 and $120.83.

  • Bears want to see big bearish volume enter into Starbucks to drop the stock back down below the 50-day SMA, which aligns with a support level at $115.57. Below the level there is further support at $111.05 and $107.66.

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