The December market plunge brought a lot of stocks down and scared out the weak holders. This is when it’s a good time to buy quality stocks.
This stock, however, had its weak holder washed out last June when it plunged 9% in one day after announcing plans to close 150 stores.
That was the first buying opportunity in Starbucks Corp (SBUX), now is the second.
SBUX has not only recovered from that ugly June 20, 2018 news announcement, but it’s also demonstrated that it was good news that the market misinterpreted.
In November SBUX exploded higher on news that it’s comparable-store turned up after several quarters of declines.
The move higher represented a breakout of nearly 3 years of consolidation.
Now the market’s December plunge has pulled SBUX down to a good support point to consider buying against.
The December low ($60.42) provides a good price level to use as a stop. I’d place it under $60.
Since the $64-$65 range represented the multi-year highs that were broken in November 2018, it would be prudent to wait until it moves back over $65 to enter any new trade.
Since last week’s high was $64.61 the short-term and long-term levels line up nicely.
Simply put it’s a buy over $65 with a stop under $60.
If you like to trade options, some long-dated lower delta calls could be big winners if this multi-year break out continues.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation