Watch These Starbucks Price Levels After Stock Surges with New CEO
Starbucks (SBUX) shares will likely remain on watchlists Wednesday after surging 25% yesterday on news the company had appointed Chipotle Mexican Grill (CMG) CEO Brian Niccol as its new CEO, replacing Laxman Narasimhan, who had served in the role for just 17 months.
During Narasimhan’s tenure, the coffeehouse chain contended with a plethora of challenges including contracting sales, increasing competition in China, and discerning spending from price-weary customers. That prompted activist investors to reportedly push for changes in a bid to boost the share price.
Double Bottom Confirmation
Starbucks shares forged a double bottom between May and July, a classic chart pattern that signals a reversal from a prior down move to a new uptrend. Indeed, the coffee chain’s news-driven pop on Tuesday confirmed the formation, with the stock gapping above the double bottom’s neckline and closely watched 200-day moving average. Crucially, the move occurred on trading volume of more than 150 million shares, the highest daily turnover in the stock since June 7, 2000, indicating active participation from larger maker players, such as institutional investors and hedge funds.
Despite the bullish technicals, the relative strength index (RSI) indicates overbought conditions, with a reading above the 70 threshold, increasing the chances for short-term profit-taking.
Amid the likelihood for further price fluctuations in Starbucks shares after Tuesday’s surge, investors should keep a close eye on several important support and resistance levels in upcoming trading sessions.
Key Support Levels in Focus
An initial pullback could see the price revisit $90, where it would likely attract buying interest around a horizontal line joining the prominent October swing low with an array of comparable trading levels between March and April. Interestingly, this location also aligns with the key 50% Fibonacci retracement level when applying a grid from the November high to the May low.
A deeper retracement may see the stock decline to the double bottom’s neckline around the $83 level, an area likely to attract support upon the price filling a gap between the April swing low and June swing high.
Important Resistance Levels in Play
The first higher level on the chart to monitor sits near $98, where the shares could run into overhead selling pressure from a trendline linking multiple peaks and troughs from March 2023 to February this year.
A more bullish upside move could test the $107.50 area, a region on the chart that may provide resistance around the November countertrend swing high that formed within the stock’s broader downtrend over the past 15 months.
Starbucks shares were down 0.3% at $95.60 in recent premarket trading.
The appointment of Chipotle CEO Brian Niccol as Starbucks’ new chief executive has caused a surge in the company’s shares. The stock has confirmed a double bottom chart pattern, indicating a reversal from a prior downtrend to a new uptrend. However, the relative strength index suggests overbought conditions, increasing the likelihood of short-term profit-taking. Investors should pay attention to key support levels at $90 and $83, as well as important resistance levels at $98 and $107.50.
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