After dipping to 52-week lows earlier this weeks, shares of Starbucks (SBUX) shot higher by more than 5% on Wednesday.
The rally came on reports that Howard Schultz — the company’s previous long-time CEO — would come back as interim CEO, while current Starbucks CEO Kevin Johnson steps down.
The market roared higher on Wednesday too, following the Fed’s decision to raise interest rates.
Schultz served as CEO From 1987 until 2000, then returned as CEO from 2008 until 2017, while stepping down as chairman in 2018. Johnson — who was the previous CEO of Juniper Networks (JNPR) — took over the helm as the retail sector took a larger focus on digital transformations, which Starbucks was a leader in.
Fast forward to today and we seem to have mixed reactions to the Schultz news.
Shares rallied “just” 5.1% on Wednesday, when many stocks exploded higher amid the broader market rally. On Thursday, Starbucks shares are marginally lower, down about half a percent.
Investors should feel relieved that Schultz is the one stepping in. Although the board seems to have had plenty of time to find a new CEO, having Schultz step in will at least allow for a stable bridge between now and the next CEO, with the company hopefully landing a perfect fit.
Trading Starbucks Stock
Chart courtesy of TrendSpider.com
We’re seeing a nice bounce in Starbucks stock and while I love this name for the long term, the technicals are still kind of questionable — and that’s putting it kindly.
Now trying to rally, shares are being rejected from the $90 area. This week’s high of $90.09 is within pennies of last week’s high at $90.05.
Starbucks stock is also struggling with the 200-week moving average and 50% retracement. So while the news of Schultz’s return was seemingly met with buying, the rally has been mild to say the least.
Again, I love Schultz and I love Starbucks, but the charts don’t lie — the market isn’t buying this one just yet.
A close at or below $86.75 leaves Starbucks stocks susceptible to more downside and keeps the $82.50 area in play. That’s followed by this week’s low near $79.
If shares really come under pressure, $72 could be in the cards.
However, the tune really changes if Starbucks can clear $90. In that scenario, it quickly puts the monthly VWAP measure and the declining 10-week moving average in play near $93.
While this area may be resistance at first, to hold the $87 to $90 area would be constructive on a dip. Above $93 and the upper-$90s to $100 will be in play next.
