Shares of coffee giant Starbucks ( SBUX) have been pulled back sharply in May. Prices broke below the 50-day moving average line and have retraced much of its April advance. Now what? Let's take a look at the charts and indicators.
In this daily bar chart of SBUX, below, I can see that SBUX is approaching the rising 200-day moving average line. It isn't clear that trading volume has increased on this decline but the On-Balance-Volume (OBV) line made a high earlier in May.
The Moving Average Convergence Divergence (MACD) oscillator has declined below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of SBUX, below, I can see (belatedly) a large bearish engulfing pattern in April. A bearish engulfing pattern is a top reversal pattern. Prices have declined with a large red candle (bearish). The rising 40-week moving average line is not far below the market.
The weekly OBV line shows weakness from the middle of April. The MACD oscillator has been in a corrective mode.
In this daily Point and Figure chart of SBUX, below, I can see a potential downside price target in the $92 area. A trade at $96.45 will refresh the downtrend.
In this weekly Point and Figure chart of SBUX, below, I can see an upside price target in the $148 area, but a trade at $96 would weaken this chart.
Bottom line strategy: I guess the honeymoon with the new CEO of SBUX is over. The broad market averages are weakening and SBUX has been pulling back to the 200-day moving average line. Many times a dip to the 200-day line is a buying opportunity but I would hold off in this instance.
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The charts of this fund are giving off a positive glow.
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