Aggressive buying by Bill Ackman has not made a great improvement on the charts of Starbucks Corp. (SBUX) . The other day Bill Ackman announced that his hedge fund had invested $900 million in SBUX and that he saw the share price doubling in three years. I do not know what numbers Ackman was crunching but I do not think he was looking at the charts and indicators. Let's do that.
In this daily bar chart of SBUX, below, we can see that aggressive buying in the past two months as the On-Balance-Volume (OBV) line rose sharply. SBUX rallied back above the declining 200-day moving average line but it is now back below it. The 50-day line is pointed up but it will not take much of a price decline to break it. The Moving Average Convergence Divergence (MACD) oscillator has rolled over to a take profits sell signal from the end of September.
In this weekly bar chart of SBUX, below, going back four years we can see a stock that has seen significant liquidation. The slope of the 40-week moving average line is down and the weekly OBV line has been in a decline for years. This is not the picture of a stock set to double, in my opinion. The weekly MACD oscillator has turned up to a cover shorts buy signal but that is only positive I see right now.
In this Point and Figure chart of SBUX, below, we can see a nearby downside price target of $51.67. This is not a view three years out but I take or make forecasts in shorter chunks.
Bottom line strategy: At this point in time I see more risk that SBUX declines than it breaks out on the upside.