Friday, 16 November 2007

Caution: Coffee is Hot

How many times have we seen people go out for some coffee? Not just any coffee, it has to be Starbucks (Nasdaq:SBUX) or some other similar java joint. Concentrating on SBUX only, things are looking pretty bad for the Seattle-based company.

I know what some of you are going to say, "What kind of gibberish are you talking about? They just reported a 36% increase in their earnings!" Right, so why was it trading around $22 (roughly 8% lower than the closing price of $24.10) in the after-hours market?

Regardless of whatever fundamental news or data that came out, it is very obvious that SBUX had a double top during 2006 to reverse its previous uptrend from years back. In fact, based on the MACD, its momentum is going to bring it to lower levels. That now explains the bearish sentiment prevalent in the stock.

It will probably take some more time before my downside target of $17.77 will be reached but it is already halfway there. The problem now will be if people suddenly become bullish with this as they find it cheap or they will do some short covering.

1 comment:

pinoytrader said...

starbucks sucks!!!! mabuhay ang FIGARO!! :)