Customers Buy Coffee, Investors Buy Starbucks Shares [TECHNICAL ANALYSIS]


If instead of buying 3 Espresso’s from Starbucks in 2009, you purchased one Starbucks share for $9, you would now sell and enjoy your daily coffee free of charge for the next 2 weeks! Starbucks shares have been surging the last 3 years, gaining 40 dollars per share increasing the stock’s value by 5 times! However, who could predict amidst the pitfalls of the economic crisis such a development for SBUX stock back then? Actually there were a couple of signals in terms of technical analysis; although knowing the outcome, it’s easy to interpret those signals. Yet, examining a stock chart of the past may reveal trading opportunities and better forecasts in future technical analysis.

The most obvious formation in the weekly stock chart of Starbucks is the Double Bottom in March 2009. After a long downtrend that lasted 3 years (since 2006) the stock seemed to find support at $8.00, when the long green candlestick (week ending 13th of March) kind of verified the support. But it was next week’s candlestick that broke the trendline (in blue), adding more credibility to the reversal formation. SBUX shares continued to gain value while the stock overcame the 50-week moving average with continuous higher lows. After the price touched twice the lagging moving average, it resumed uptrending with one of the best performing weeks in late July!


Since then, Starbucks stock gained almost every month with minor pullbacks. Even when the stock price met the resistance level at $40, the retracement was a mere 5 dollars (just 12.5%) and the breakout simply proved the long-term trend. Question now is where it will stop! Surely the Starbucks shareholders don’t mind that much now! They are probably already drinking many coffees without worrying about the cost!