You know I have been cautious/bearish on SBUX for a while now, mostly due to the abnormally steep uptrend the stock has been in for the past few years. Of course, with stocks like Visa sporting similar conditions, but pushing higher yet, the idea has been to be quick with any shorts and not become stubborn as we allow the market to decide whether my thesis is right or wrong.
Recently, Starbucks has abruptly dropped and is bear-flagging around its 100-day moving average. I consider it a short under $75.91.
Also note the running bearish RSI divergence, seen on the top pane of the daily chart, below.
What that means is that while price made new highs throughout the fall months, upside momentum was waning. Divergences do not mean much without price resolving in their favor, though. And that is why the recent weakness is noteworthy, in my view.
A close back over $78 would have me backing off this the thesis and expecting at least a test of the 50-day moving average above.
For reference, the RSI is simply the “Relative Strength Index” used to identify changes in technical momentum. Above 50 is generally considered a bullish RSI, with above 70 viewed as overbought. Trending below 50 is considered a bearish RSI pattern, with below 30 considered oversold.
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SBUX is indeed a curious one..I too am looking to see if it pulls back. Appreciate the article.
Cheers, thanks for reading.