Though the site is largely dedicated toward the macro, we do like to highlight individual stocks as well, so long as they have a compelling “story” and some type of interesting risk/reward set-up is in play.
This brings us to SBUX.
The technicals on this stock are compelling and suggest a big move is at hand in the near-term, potentially as early as 7/26 when the company reports EPS.
As it stands, in the chart below SBUX has formed an ascending wedge between lines (1) and (2). Usually such patterns are bearish.
Line (2) is quite important as it represents trend-line support off the stock’s 2008 and 2009 lows.
At the same time this wedge forms, at inset (A) the stock is also about to complete a flag pattern between the aforementioned line (2) and line (3). Line (3) is trend-line resistance that has pushed the stock lower off its 2012 highs.
Given the formation of the latter three technical set-ups [( 1) ascending wedge, 2) trend-line support from the 2008/2009 lows and 3) the flag pattern] all SBUX needs is a catalyst to produce what will likely turn into a large move in a compressed period of time.
If that catalyst turns out to be positive, the stock could target line (1) in the mid to upper 60s.
If negative, we could see a quick, ~20% drop materialize into the low 40s whereby 38.2% Fib support comes into play along with the highs from the 2006.
Looking forward to EPS on 7/26 to see which way we go.