Is Starbucks Corporation (SBUX) Ready for a Bounce?

Options traders favor calls as SBUX pulls back toward its 80-day moving average

Dec 17, 2015 at 12:08 PM
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Starbucks Corporation (NASDAQ:SBUX) attracts more attention than usual around the holidays, with its festive flavored drinks and possibly not-so-festive red cups. The shares are trading 0.3% lower at $60.18 today, but the technical outlook suggests SBUX shares are on the verge of some holiday cheer.

From a broader perspective, SBUX has been having an impressive year so far. The stock has added more than 46% on the charts in 2015 alone, hitting an all-time high at $64.00 in late October in the wake of its quarterly earnings report.

Over the last six weeks, SBUX has pulled back toward its 80-day moving average, which previously served as support throughout the month of September. The stock's retreat to this trendline support could signal an imminent bounce. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, following the stock's six previous pullbacks to this trendline, SBUX has historically posted a positive 21-day return 80% of the time. What's more, the average return over this time period has been 5.24%.

Analysts are eyeing new highs ahead for SBUX, as 20 brokerages currently give the stock a "buy" rating or better, compared to just four "holds." And the 12-month consensus price target of $68.09 sits in never-before-seen territory.

Options traders, meanwhile, have been wary of the stock. Starbucks has a Schaeffer's put/call open interest ratio (SOIR) of 1.20, which ranks higher than 96% of all comparable readings taken in the last 52 weeks. That means puts are outnumbering calls among options expiring in the next three months by a wider-than-usual margin.

Today it appears that calls are heating up the options pits, though, as eight of the 10 most active SBUX options are calls. In fact, the top option at midday is the December 61 call, where a total of 1,081 contracts have traded so far. With just over a day until these front-month options expire, Starbucks Corporation (NASDAQ:SBUX) is trading less than one point below this popular call strike.


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