Starbucks took a beating with a reverse head-and-shoulder

Starbucks the stock took a beating today. It’s trading down 6% after a “lackluster” earnings report. I continue to like the stock and here’s why.

Technically, the stock is forming a giant reverse head-and-shoulder with a major resistance at $40. I didn’t expect the stock to blow past the resistance as soon as today. If the width of the right shoulder is going to be about the same as the width of the left shoulder, it’ll probably be another month before we have a breakout above $40, that is if we do get a breakout.

sbux-11-17-06


Fundamentally, the company has been delivering >20% year-over-year(YoY) earnings growth consistently. The CEO Howard Schultz just said on CNBC that the reason for the higher costs was that they’re investing ahead of the growth curve and they expect to have a 20% revenue growth YoY and 20-25% eanrings growth YoY for the next 5 years. You’ve gotta love that! And if you’ve seen Howard speak, you’ll agree with me that he’s an honest person who is doing the right thing for the company, the employees, and the community. I’m willing to put my money where my mouth is and am already long the stock.

Oh, did I mention that speculating in stocks is a favorite hobby of mine? 🙂 I participate in the message boards on Tipping Monkey who’s being launched by a friend of mine. Check it out if you’re into common stocks and options!

Disclosure: I’m long SBUX


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