Starbucks Corporation (SBUX) ended a steep correction to a three-year low in June 2018 and turned higher in a relief rally that accelerated into 2015 resistance after the company reported an unexpected sale surge in November. The shares have been hovering near that price level for three months, carving a narrow trading range, while accumulation has surged to a two-year high. This relatively quiet price action raises the odds for a major breakout that gathers momentum into the new decade. 

January's fiscal first quarter earnings report triggered a 3.6% rally that failed to clear resistance, but weekly and monthly relative strength readings continue to fire on all cylinders, supporting higher prices. However, a positive catalyst or final pullback may be needed at this point to prime the pump, with a decline into the 50-day exponential moving average (EMA) offering a potential buying opportunity. Even so, the technical outlook will remain bullish as long as the stock holds 200-day EMA support near $60.

SBUX Long-Term Chart (1992 – 2018)

Long-term technical chart showing the share price performance of Starbucks Corporation (SBUX)
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The company came public in June 1992 at a split-adjusted 34 cents and entered an immediate uptrend that stalled at $1.01 in 1994. It cleared that resistance level in 1995 and stair-stepped higher into the new millennium, finally topping out just above $6.00. The stock got cut in half after the internet bubble broke, bottoming out after the Sept. 11 attacks in 2001 and posting a new high in 2003.

Starbucks shares performed well during the mid-decade bull market, lifting into the upper teens in 2006. That marked the highest high of the decade, ahead of a downtrend that accelerated during the 2008 economic collapse. The stock gave up all gains posted in the five-year uptrend during that period, finding support 16 cents above the 2001 low, while the subsequent bounce unfolded in a V-shaped pattern that reached the prior high in 2011.

An immediate breakout caught fire, tripling the stock's price into the October 2015 top at $64.00, which also marks the price level in play after the 2018 rally. A sell-off into the second half of 2016 ended in the lower $50s, establishing a trading range, ahead of a failed 2017 breakout attempt. It violated range support in June 2018, but bulls remounted that level a month later, setting off a buying signal, ahead of a rapid advance into multi-year resistance.

The monthly pattern looks like a breakout, but the rally ended when it crossed above the 2015 high and completed the fourth point in a rising channel (red lines). This suggests that range-bound action remains in force while the bull-bear conflict digests selling pressure at this level. A high-volume advance into the $70s is needed to confirm a breakout with this price structure, which is something that hasn't happened after three months of testing.

SBUX Short-Term Chart (2017 – 2019)

Short-term technical chart showing the share price performance of Starbucks Corporation (SBUX)
TradingView.com

The stock entered the November gap in December but failed to fill the last point, while the 200-day EMA has risen into the fill level. This exposes price action to a second trip down to $60 or so, but a higher low at or around the 50-day EMA would go a long way in completing the three-month trading range pattern and supporting a breakout. Also, note how the stock will break the black trendline of higher lows if a decline carries into the gap bottom, setting off bearish signals that are likely to increase volume and volatility.

The on-balance volume (OBV) accumulation-distribution indicator posted a multi-year high in November and turned lower in a minor distribution phase. Buying pressure into early February has failed to reach the prior high, but there isn't enough data to signal a bearish divergence. As a result, broad technicals continue to favor bulls and higher prices as long as pullbacks hold the 200-day EMA.  

The Bottom Line

Starbucks stock is holding close to 2015 resistance, raising the odds for a major breakout that targets the low $80s.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.