Schaeffer's Trading Floor Blog

Charts to Watch: Starbucks Corporation (SBUX) Hits the Wall

SBUX collides into double-barreled chart resistance

by 3/12/2014 2:06 PM
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Fans of the Starbucks Corporation (NASDAQ:SBUX) iPhone app are celebrating today, as a soon-to-be-released version includes new features, such as the ability to tip your baristas directly from your smartphone. The stock has edged 0.2% higher today to $75.21, but this rally may be short-lived, as the shares are encountering some formidable technical resistance.

First, the shares have run up against the $75 region, which resisted the stock's advances in mid-February. This area coincides with the equity's 80-day moving average, a trendline that served as support for most of last year before being breached in mid-December. Starbucks has actually not traded north of this trendline since the final trading day of 2013.

Daily chart of Starbucks Corporation (SBUX) since October 2013 with 80-day Moving Average
Daily chart of Starbucks Corporation (SBUX) since November 2012 with 80-day Moving Average

What's more, SBUX could soon face technical headwinds, as the stock's bullish bandwagon remains fairly crowded. In fact, bears have been slow to bet against the security, as evidenced by the fact that short interest constitutes less than 1% of the stock's available float. This greatly reduces the chances that SBUX shares could benefit from any short-covering activity.

On the analyst front, 18 of the 24 brokers following the stock have named it a "buy" or better, despite its year-to-date loss of roughly 4%. The 12-month consensus price target of $88.12, meanwhile, sits north of the equity's all-time high of $82.50 (achieved last November).

Finally, the short-term options crowd has been rather call-heavy. Schaeffer's put/call open interest ratio (SOIR) for Starbucks Corporation (NASDAQ:SBUX) weighs in at 0.80, or lower than 82% of all comparable readings taken during the last 12 months. Should SBUX fail to muscle through the technical resistance it currently faces, a change of heart among bullish holdouts on Wall Street or Main Street could exacerbate recent selling pressure.

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