Bet On Starbucks Stock to Bounce Again Soon

SBUX has approached a historically bullish trendline

Managing Editor
Dec 17, 2018 at 11:57 AM
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At last check, Starbucks Corporation (NASDAQ:SBUX) stock was down 0.5% to trade at $64.79, despite receiving a price-target hike to $70 from $69 at J. P. Morgan Securities. If history is any guide, the coffee name could perk up heading into 2019 after flashing a bullish signal.

Starbucks stock is now within one standard deviation of its 50-day moving average. Over the past few years when encountering this trendline, SBUX went on to average a one-month gain of 7.6%, and was higher 75% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

A move of similar proportions would vault Starbucks stock past its Nov. 8 record high of $68.98. The shares have pulled back since then, notching three straight weekly losses, although the damage appears to have been contained by that 50-day trendline. Overall, the coffee stock boasts a 12.7% lead for 2018. 

Daily Stock Chart SBUX

Should Starbucks stock keep climbing, a shift in analyst sentiment could provide tailwinds. Of the 24 brokerages covering SBUX, 11 still rate it a tepid "hold." In addition, its consensus 12-month price target of $68.48 is only a slim 5% premium to its current perch. 

In addition, near-term options traders have taken a much more pessimistic stance lately. SBUX's Schaeffer's put/call open interest ratio (SOIR) of 3.53 sits in the high 89th percentile of its annual range, showing put open interest more than triples call open interest among options expiring in the next three months. The lofty percentile suggests short-term traders have rarely been this put-heavy on Starbucks during the past 12 months. Should the security once more bounce off technical support, an unwinding of pessimism in the options pits could help support the security's rebound.


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