Bulls Buy The Dip In Starbucks Stock: Is A Trend Change Brewing?

On Tuesday, OTR Global downgraded Starbucks Corp SBUX from Positive to Mixed. Starbucks stock fell through a daily support level at $110.38 on the 5-minute chart, but bulls came in and immediately bought the dip.

The Starbucks Chart: When the dip on Starbucks was bought, it helped the stock pop back up above another resistance level at $111.05. If Starbucks closes Tuesday’s trading session near its high-of-day, it will print a bullish hammer candlestick on the daily chart.

A hammer candlestick is found at the bottom of a downtrend and can indicate a reversal to the upside is in the cards.

See Also: How to Buy Starbucks Stocks • History, Pros & Cons

Tuesday’s price action, when combined with similar price action on Sept. 20 and Sept. 30, has caused Starbucks to create a bullish triple bottom pattern just above the $110 level. If the pattern is recognized, Starbucks may rise up above its Oct. 1 high of $113.46, which would mark a higher high and give further indication a bullish trend change is in the works.

Starbucks has two gaps above and because gaps fill about 90% of the time it is likely the stock will trade up into the price ranges in the future. The first gap is between the $117.02 and $118.36 levels and the second higher gap is between the $123.37 and $124.25 range.

Starbucks is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. Starbucks is also trading slightly below the 200-day simple moving average (SMA), which indicates overall sentiment is bearish. Starbucks attempted to regain the SMA as support Tuesday but failed and wicked from the level.

• Bulls want to see big bullish volume come in and drive Starbucks back up above the 200-day SMA. If the stock can regain the level as support, it has room to trade back up toward $113.86.
• Bears want to see big bearish volume come in and drop Starbucks down below the $110 level, which would indicate the downtrend is still intact. The stock has support at $107.66 and $104.94 below the level.