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Tickers in this Article: SBUX, PNRA, CBOU, THI
The idea of the coffee shop has literally been redefined in recent years as Starbucks (Nasdaq:SBUX) locations have sprung up worldwide. While there is still a subset of coffee drinkers who want a plain old "cup of joe", gourmet strains have exploded in popularity and many consumers are willing to travel to their neighborhood coffee shops to get them. Beyond serving exotic flavors, coffee shops are also making it increasingly convenient for consumers to lounge around in a comfortable environment, no doubt in order to have them make repeated purchases. Because the margins in gourmet coffees and pastries tend to be much higher than for a traditional cup, the stocks for these coffee shops have been a viable option for investors.

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Starbucks for instance, has traded from a split adjusted low of 70 cents per share to near $40 per share at its peak. While SBUX was a market leader for several years, it suffered through a sharp correction from late 2007 through early 2009 as investors fled from any stock related to consumer discretionary spending. With a correction low near $7 per share, it appears that the pullback was overdone. SBUX proceeded to rally over the next year and has since entered a sideways trading range as it consolidates the gains. SBUX has respected the $24 level on several occasions over the past few months and this appears to be a solid level of support for the stock. If the markets can gain some traction in the coming weeks, then SBUX may very well challenge its recent highs.

Source: StockCharts.com


Panera Bread Company (Nasdaq:PNRA) has actually been a public company longer than SBUX has. It also had an amazing run in the early 2000s as it rallied from the low single digits to the mid-$80s. PNRA has shown more relative strength than SBUX as well, by trading to new all-time highs in the past year. PNRA has also been in a sideways range recently as it consolidates those gains. It has respected the $73 level on several pullbacks, making this a key level to watch moving forward. The levels to watch on the upside are the recent highs near $80 and its June high near $85. A move above this level would set a higher high and signal a possible breakout attempt.

Source: StockCharts.com


Caribou Coffee Company (Nasdaq:CBOU) is a lesser-known stock in this sector, but its chart is shaping up nicely. CBOU cleared a base in April and rather than fall apart in the recent correction in the markets, it has simply traded sideways above its prior base. It is getting close to the top of its range; a move above $10.50-$10.70 will signal a breakout.

Source: StockCharts.com


Tim Hortons (NYSE:THI) is a stock in this sector that recently began to clear the base it has been building for several months. THI had been trading in a tight base since March with the $32 level holding on a few occasions. While the $34 level has marked the general top of the range, the $35 level has also been tested on a few occasions. THI is attempting to break out here, but traders should note that the company reports earnings on August 12. While this may rule Starbucks out for a trade, it should be watched to see if its earnings report acts as a catalyst for the group.

Source: StockCharts.com


Bottom Line
Coffee stocks have experienced a resurgence since the bear market low in 2009, and may be close to ending their recent consolidations. While much depends on the overall health of the markets, each of these stocks has a clear level of support it has tested on multiple occasions. These levels will be important to watch moving forward and should serve as a floor on potential weakness. In the end, these stocks remain in a consolidation pattern but should be watched in case they attempt to clear their bases. If they emerge from their bases, they could provide great trading opportunities.

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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