Stock Trading Predictions & Technical Analysis: SBUX

Saturday, November 7, 2009

SBUX - Looking very bullish

SBUX - BUY SIGNAL

I decided to take a long position in SBUX today after seeing a both a break out and a strong move back up over its 50 day MA. Also, I found that there is low risk in taking a position today, since SBUX support level is still relatively close to current levels. This allowed me to follow my rule of not setting a stop loss of over -7% or -8%. In fact it is slightly below this range. This means the price wouldn't need to move back much lower to give us a SELL SIGNAL, and this would be just below the 50 day MA. The move up happened on much stronger volume than on average. Also the MACD started crossing over its signal, which I found more reliable than and predictive of upward moves than the stochastic.

When I look at the chart under a longer time line, it seems SBUX has the potential to go as high as around $27.50 before pulling back again. However, SBUX still has to go through the next resistance level of $21.50, and then it should have no problem going towards $24.00 where it may struggle a bit.

The reason SBUX may struggle towards $24.00 price range is because there may be strong resistance since on the weekly chart, that's where the 200 day MA stands. However, a move over $24.00 should allow SBUX to have no problem going to $27.50, where I would expect to see the next pullback.

However, keep in mind that despite the last few pullbacks SBUX is in a very strong up trend since almost a year ago in November 2008. A move towards $25.00 could signal a strong long term base/support for SBUX. Coincidentally, SBUX would give us a STRONG BUY SIGNAL with a move towards $25.00, since it will have broken up over its weekly 200 day MA, which is a very bullish signal for the longer term. I will be setting a stop buy order around this level to add to my position.

If I see such a move hold up, I may possibly sell my position in MGM to add more to SBUX. I would do this in the event where MGM doesn't make any significant moves upwards. However, if gold starts pulling back and my ABX stop loss trigger gets trigerred I may simply use the proceeds from ABX.

SBUX - LONG

2 comments:

YoelNovember 7, 2009 at 6:18 PM
Someone asked the following:

"I was reading your blog today, and but could not see the same pattern with starbucks since the stock has already risen about $2 (10%) from its support level of $18.50-$19.00 to $21. If the purchase was made around $19.50 or $20, it would be more suitable price to enter.Is my understanding correct? Or am I way of the track?"

My Response:

Although SBUX has risen +10% ($+2.00), it actually broke through 2 support levels at once. The first one being at slightly below $20.00, and the 2nd one which is not vey sharp at $21.00. For the moment my stop loss order is set slightly below $20.00, with my entry near $21.00. When I had entered my position, SBUX had not gone over the $21.00 resistance level yet. If SBUX moves high enough above $21, I will probably change my stop loss order towards that point. My stop loss order is actually around -6% of my entry point. A sharp move below $20, would probably signal a potential retest of the of the $18.75 to $19.00 levels.
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YoelNovember 7, 2009 at 6:23 PM
The support line at $21.00 could have been drawn in another way which would be up trending, it's not always straight horizontal lines. The support line is an up trending line, but could also be drawn straight like I did based big down bar that happened earlier.
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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.