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How Starbucks Can Run to All-Time Highs

After a strong rotation to the upside, Starbucks is threatening to make all-time highs. Here's how to trade the stock from here.

There’s been a run to new highs, be it from Amazon  (AMZN) - Get Amazon.com, Inc. Report, the S&P 500 and a number of stocks in between.

For Starbucks’  (SBUX) - Get Starbucks Corporation Report part, it hit all-time highs in February after a brutal decline in March 2020. Shares fell more than 46% and were already struggling before that.

From its previous all-time high, Starbucks sank almost 50%.

However, with a faster-than-expected recovery in its Asia business (driven by China), Starbucks stock found some solid momentum to ride off the lows.

Now coupled with the reopening trade here in the U.S., Starbucks has some catalysts lining up for the second half of 2021.

Until recently, the stock had been consolidating in a sideways manner. With shares now moving higher can Starbucks get to all-time highs?

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Trading Starbucks 

Weekly chart of Starbucks stock.

Weekly chart of Starbucks stock.

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Take a good long look at this weekly chart, as there are a ton of nuances and study points that traders should take note of.

First, we had back-to-back weekly highs of $113.22. On the first one - four weeks ago - shares broke down below the 10-week moving average and tested down into support at the 21-week moving average.

In the following week, Starbucks stock reclaimed the 21-week moving average, then the 10-week moving average, while also hitting the same high at $113.22. Notice that the stock put in a higher low that week too.

All of that combined for a big-time rotation last week, as shares cleared $113.22. Starbucks is now going monthly-up as well, as it continues to push higher over the June high.

From here, I’m looking for the stock to test the highs near $119. Above that and the 161.8% extension from the 2020 range comes into play around $121.

However, if we instead use the prior all-time high (as opposed to the 2020 high), the 161.8% extension doesn’t come into play until about $130.

That could be a reasonable upside target should Starbucks stock clear $119 and hit new highs.

On the downside, let’s see that the $113 to $115 area acts as support on the pullbacks, as well as the 10-day moving average. Earnings later this month are likely to create some volatility as well, which is worth noting.