Catching A Falling Knife (or Macchiato)
This is a Symbol Surfing Post from Thu, Jun 28, 2018.
I tried to highlight the trading range SBUX has been in for the past 3 years.
The range is roughly between the mid 50's and the low 60s.
For a buy and hold investor, it has essentially not done anything except pay a dividend.
On June 19, 2018, the company announced it would close 150 stores next year.
Starbucks shares drop on weak sales forecast plans to close more than 150 stores next year
My first thought was to look at buying this a few days after and look for a "dead cat bounce".
(I apologize if you love cats. It's just one of those stock market terms that doesn't make sense like "market capitalization" or...)
So I have decided to not get in...yet and here's why.
The stock price has dropped far below support, the bottom of the established 3 year trading range.
This means the stock price is not only at a 52 week low but also a multi-year low.
The next major price it could test is $40, which was the previous resistance in 2013 to 2014.
I don't know if it will drop further but right now it feels like it could.
Oh by the way, how many locations does Starbucks have?
150 stores must be a huge percentage of the total number of stores, right?
"With more than 24,000 stores across more than 75 markets, it’s clear that our passion for great coffee, genuine service and community connection transcends language and culture."
150/24000 = 0.00625 or 0.6%
So the stock dropped over 15% because the company is closing less than 1% of their stores.
Closing stores can be a good thing for the bottom line.
So I am definitely watching this.
If it hits $40, I will probably buy.
Thu, Jun 28, 2018 SBUX @ $48.54
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