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Precarious situation now for Starbucks bulls in the medium term

Article By: ,  Financial Analyst
November 22, 2019 3:09 AM

 Medium-term technical outlook on Starbucks Corp (SBUX)



click to enlarge charts

Key Levels (1 to 3 weeks)

Pivot (key resistance): 84.94

Supports: 81.03 (trigger) & 74.80/73.70

Next resistance: 92.16

Directional Bias (1 to 3 weeks)

Bearish bias below 84.94 key medium-term pivotal resistance and a break below 81.03 reinforces the start of a multi-week corrective down move sequence to target the 74.80/73.70 support zone in the first step.

On the flipside, a clearance with a daily close above 84.94 negates the bearish tone for a rebound towards the next resistance at 92.16 (12 Sep 2019 swing high & 61.8% Fibonacci retracement of the on-going decline from 26 Jul high to 05 Nov 2019 low).

Key elements

  • Since its all-time of 99.73 printed on 26 Jul 2019, the share price of SBUX has declined by 18% so far and it is now testing a major ascending trendline support in place since 28 Jun 2018 low.
  • Also, it has traced out a series of “lower highs and lower lows” since 26 Jul 2019 that indicates the major uptrend phase from 28 Jun 2018 is at risk of transiting to a corrective down move phase.
  • The daily RSI oscillator has already staged a bearish breakdown from a significant support (in parallel with the price action support from 28 Jun 2018 low) and retreated from it on 18 Nov 2019. These observations suggest that medium-term downside momentum remains intact and the major uptrend phase of SBUX since 28 Jun 2018 is at risk of being damaged.
  • The 74.80/73.70 support zone is defined by a confluence of elements; the swing low areas of 17 Apr/29 May 2019, the lower boundary of a medium-term descending channel from 30 Aug 2019 high & a Fibonacci retracement/expansion cluster).
  • Relative strength analysis from its ratio charts against the market (S&P 500) and its sector (Consumer Discretionary) suggest underperformance of Starbucks (SBUX).

Charts are from eSignal 


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