Starbucks Corporation SBUX fell about 6% Monday along with a slew of China-based stocks.
The Hang Seng Index closed 6.36% lower at $15,180.70, down more than 42% from the Jan. 4 opening, dragging stocks such as China Alibaba Group Holdings, Ltd – ADR BABA and Nio Inc – ADR NEO Low… Continue reading
Starbucks has a large presence in China, operating more than 5,400 stores in the country’s mainland. When President Xi Jinping secured himself an unprecedented third term on Sunday and reshuffled its Politburo Standing Committee to elect loyalists, and investors feared the Chinese Communist Party’s goals could prove bad for China’s economy.
The negative reaction to the news caused Starbucks to fall below the 200-day simple moving average (SMA), throwing the stock back into a potential bear cycle. Starbucks has held above the 200-day SMA for the past few weeks, showing relative strength versus the broader markets.
Would you like a direct analysis? Find me in the BZ Pro Lounge! click here for a free trial.
The Starbucks table: Starbucks has been trading in a mostly sideways pattern between around $83 and $93 since July 28th. On Sep 8, Starbucks reclaimed the 200-day SMA as support and has held above this level for most of the time.
- When a stock is trading above the 200-day SMA, it is considered to be in a bull market. Losing the area on Monday likely spooked some investors. The plunge also caused Starbucks to post a lower low, confirming that Starbucks is now trading in a downtrend.
- If Starbucks closes the trading day with a significantly lower wick, a bounce is the most likely scenario for Tuesday. The second most likely scenario is that Starbucks will print an inside bar pattern to consolidate the steep decline.
- If Starbucks rallies on Tuesday, bullish traders will want to see the stock regain the 200-day SMA. If Starbucks meets sellers and closes the trading session near the daily low, the stock will print a bearish kicker candlestick that…
