Will Starbucks' Coffee Brewing Brew More Profits?

Starbucks Coffee building during daytime

Image Source: Starbucks

Starbucks Corporation (SBUX) is a multinational conglomerate that specializes in coffee products, a global coffeehouse chain, and other bakery products. Its coffee products range from freshly brewed coffee to ready-to-drink and single-serve coffee. Starbucks has become very successful at branding itself as the go-to specialty coffee retailer.  SBUX is listed on Nasdaq and is a component of the Nasdaq 100 and S&P 500 under Consumer Discretionary.

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Starbucks (SBUX) wyckoff method

SBUX's price had a last leg up to hit $122 in late July 2022. The price then retraced and bounced between $106 and $117. The first hint of weakness appeared with a gap down on 29 Oct with a big spike in volume, suggesting the presence of supply. The confirmation came on 7 Jan 2022 as Wyckoff's last point of supply (LPSY) when the price broke below $106 and completed the Wyckoff distribution phase. This was followed by Wyckoff's sign of weakness (SOW) to around $92 accompanied by an increase in volume.

The weak rally off the support at 92 suggested weakness ahead. A selling climax was formed in Mar 2022 followed by an automatic rally. The rally hit $92 but reacted with an SOW as a lower low test. The 4 May bar gaps up with a huge spike in volume. However, the reaction broke the long-term support of $70 as a spring-like action. Nevertheless, the volume subsequently decreased suggesting exhaustion of supply. This is further confirmed by higher lows, suggesting no follow-through to the downside.

Around 18 July, the price started the Wyckoff sign of strength (SOS) rally and stayed committed at the higher end of the range between $82 and $90 for the next few weeks. This was the Wyckoff change of character, which changed the downward bias to a trading range. The price broke above $90 on 4 Nov with earning results as a catalyst, signaling another SOS rally ahead. This suggests the completion of a Wyckoff accumulation phase. The rally continued until 2 Dec then ranged between $96 and $105 in a Wyckoff backup (BU) manner. On 6 Jan 2023, the price managed to break above and committed above $105. 


Bullish. According to the Wyckoff method, SBUX has completed the accumulation phase and is now in the markup phase. It will likely rally up to challenge the previous high of $122. If the price breaks below $105, it will then retest the support around $96.

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Disclaimer: The information in this presentation is solely for educational purpose and should not be taken as investment advice.

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