On Sunday evening, Benzinga asked its followers on Twitter what they were buying at the open on Monday. From the replies, Benzinga selected one ticker for technical analysis.
William Muscato @wmuscato is buying Starbucks Corporation (NASDAQ:SBUX).
On March 8, Starbucks announced it would suspend the business activity of all 130 licensed stores in Russia and stop all shipments of its Starbucks products to the country following Russia’s invasion of Ukraine. The multinational coffeehouse chain employs about 2,000 Russians and although the restaurants have been closed temporarily, Starbucks’ licensed partner will be providing the employees with support.
On March 4, Starbucks announced it would donate the royalties it receives from its Russian locations to the relief efforts in Ukraine and it had contributed $500,000 to the Red Cross and the World Central Kitchen for humanitarian relief efforts.
Starbucks' stance on the war in Ukraine is unlikely to affect the stock, which has lost about 35% of its value since July 23, 2021, when it reached an all-time high of $126.32.
On Friday, the stock tested a key support zone at $82.37, which Starbucks hasn’t closed below since Aug. 25, 2020, and bounced up slightly. On Monday, the stock opened under the level and continued to slide.
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The Starbucks Chart: On Friday, Starbucks printed a big bearish engulfing candlestick on the daily chart, which indicated lower prices were likely to come on Monday. If Starbucks closes the trading session on Monday near its low-of-day price, it will print a bearish kicker candlestick pattern, which could indicate lower prices will come again on Tuesday.
At least a bounce is likely to come at some point over the next few days because Starbucks has developed bullish divergence, although at this point it is considered weak.
Weak bullish divergence occurs when a stock price continues to make lower lows but the relative strength index’s (RSI) lows are flat.
Starbucks’ RSI is currently measuring at about 27%, which also indicates a bounce may be on the horizon. When a stock’s RSI reaches or falls below the 30% level it becomes oversold, which can be a buy signal for technical traders.
The stock is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. Starbucks is becoming extended from the eight-day EMA, which indicates that Starbucks will eventually need to bounce or trade sideways for a period of time to allow the eight-day to catch up.
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- Bulls want to see Starbucks trade sideways to indicate the selling pressure is drying up and then for big bullish volume to come in and push the stock back up above the key level near $82. Above the area, there is further resistance at $86.61 and $90.96.
- Bears want to see sustained big bearish volume cause Starbucks to close the trading session near its low-of-day price, which could indicate the stock will form another big bearish engulfing candlestick on Tuesday to set up a bearish three black crows pattern. Starbucks has support below at $79.18 and $76.69.
Photo: Courtesy Starbucks
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