Weak Coffee

Starbucks has had a wonderful run over the past 5 years, rising more than 200%. Over this time frame it, as you can see below, went through two major upward thrusts and (now) three consolidations. Each of the prior consolidations lasted about a year. The first one in 2012 was more had a more downward direction as it lost almost 30%. The second one which started at the end of 2013 was more of a sideways move as it lost just 17%. The good news for SBUX investors was that each consolidation resolved to the upside.

Fast forward to today and you can see the weakness in price and the fact price is stuck in another consolidation. Looking like the last sideways consolidation (at least so far) as it has muddled along for not quite a year and has lost 16%. RSI momentum in the upper pane shows this is the only consolidation that started off with a negative divergence warning. Also, price has formed lower highs with each thrust higher while the $52-$53 area has acted as significant support. Finally, the descending triangle pattern that has formed warns of continued weakness.  Those long SBUX need to be concerned that while the current level has held 4 times in the past, the more times price touches a level the higher the probability it will break through (in this case to the downside).

All in all, like so many stocks right now, SBUX is at a crossroad. A break above the descending triangle resistance line and we are likely off to the races and in for another big run higher. A break below (red) support with confirmation, a test of the ~$41 level, some 20%+ lower is the pattern's projected downside target.

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Those already owning SBUX need to keep a close eye out for a breakdown below both (red) horizontal and blue rising support as that would provide a high probability we see weaker SBUX prices ahead.