Stock of the day: Starbucks
04 September 2023
As leaves begin to fall, coffee lovers are flocking to Starbucks for their annual fix of pumpkin spice lattes. But while seasonal favorites may be returning to the menu, the outlook for Starbucks' stock isn't as warm and cozy. A looming head and shoulders pattern, highlighted in yellow on the chart, is a bearish indicator that could spell trouble for the coffee giant.
This pattern, typically a sign that the asset may be headed for a downturn, becomes activated upon breaking its 'neckline,' which in this case is represented by a blue line on the chart. If the price drops below this critical level, it would trigger a sell signal for investors.
Compounding Starbucks' woes is the fact that the stock has already broken through a midterm uptrend line, denoted by a green line. This was the first hint that the bullish momentum Starbucks had been enjoying might be waning. Now, with the head and shoulders pattern nearly complete, the situation is turning increasingly precarious.
However, all is not lost. A saving grace for Starbucks would be if the price breaks above the red line that connects the top of the 'head' to the top of the 'right shoulder' in the head and shoulders pattern. Such a move would negate the bearish formation, paving the way for renewed optimism and potentially signaling a midterm buy opportunity.
In summary, Starbucks is at a critical juncture. With the head and shoulders pattern nearing completion, investors are watching the blue neckline closely. A breach here would likely send the stock tumbling lower. Conversely, breaking above the red line would dispel the clouds of bearishness, offering a glimmer of hope for Starbucks investors as they sip on their autumnal treats.