Starbucks (SBUX) reported earnings after Tuesday's closing bell. Earnings, revenue, and same store sales were all slightly better than expected, and the stock was modestly higher in after hours trading.
Where does Starbucks go from here? Let's go to the chart to find out.
Starbucks has been an underperformer this year. The stock has failed to keep up with the S&P 500, and with the consumer discretionary sector as a whole.
That sector is represented by the S&P Select Consumer Discretionary ETF, symbol XLY on the chart below (green). In addition to Starbucks, top holdings for the XLY ETF include such names as Home Depot (HD), McDonald's Corp. (MCD), and Amazon (AMZN), which is scheduled to report earnings on Thursday.
Looking at the company's individual chart, Starbucks has been quiet recently. The stock is trading on low volume during the month of July (shaded yellow).
Starbucks climbed as high as $83.62 in June (green dotted line). Traders will focus on that area as a target, especially in the short term.
The key level to watch for Starbucks is $70.65 (black dotted line). That level has acted as support since early April. A drop below that level would open the door for Starbucks to slide to a subsequent support level near $61.
Starbucks announced prior to earnings that it would close 400 stores over the next 18 months. While this may seem like a negative on the surface, the closures give Starbucks the opportunity to eliminate some underperforming units. As a result, Starbucks has an opportunity to emerge from the Covid-19 crisis a leaner, more efficient company.
Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.