Starbucks Pulls Back Within A Trend — Will The Stock Continue To Grind Higher?

Starbucks Corporation SBUX gapped down slightly to open Wednesday’s trading session after rejecting a key resistance level near the $110 level on Tuesday.

The multinational coffee chain has been trading in an uptrend since March 24, making a series of higher highs and higher lows, and was due for a pullback.

The higher highs indicate the bulls are in control, while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.

Rising longer-term moving averages (such as the 200-day simple moving average) indicate a long-term uptrend.

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The Starbucks Chart: Starbucks’ most recent higher high was formed on Tuesday at $109.23 and the most recent confirmed higher low was printed at $103.07 on April 10. The stock hasn’t printed another higher low since that date and is in need of a retracement.

• On April 11, Starbucks broke up bullishly from a bull flag pattern on the daily chart, which had a measured move of about 8%. After breaking from the flag formation, Starbucks headed 6% north, suggesting there may be about another 2% upside for the stock before the break from the pattern is complete.
• Bullish traders want to see Starbucks print a bullish reversal candlestick, such as a doji or hammer candlestick, over the next few trading days to indicate the next higher low has occurred and the stock will continue higher within its uptrend. Bearish traders want to see big bearish volume come in and break Starbucks down under $103, or for the stock to top out under $109, either which would negate the uptrend.
• Starbucks has resistance above at $109.05 and $113.57 and support below at $104.02 and $99.15.

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