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. 
 

Bias

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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