Shares of Starbucks (SBUX) - Get Report are finishing off the week with a nice gain. The stock is up over 2.5% today and is trading at new January highs. Volume is running relatively light during this breakout-type move, but the price action is quite bullish. The stock's pullback that began in late October appears to have ended. Starbucks investors should be taking on a more positive view of the stock in the near term.
A little over two weeks ago, Starbucks began to show signs that the pullback and consolidation that began in late October was coming to an end. The stock had tested key support near its 200-day moving average shortly after the early January selloff and held in nicely. Starbucks attempted to rally, but heavy resistance near the December close kept shares in check. The result was more sideways action over the next three weeks while major support near the $56 area proved its strength.
The narrow consolidation that has dominated the action through most of January has set Starbucks up well for a fresh bull run. In the near term, Starbucks bulls should consider the $60-to-$59 area as key support. The upper band of this zone is marked by the Jan. 4 breakdown gap. This area should supply solid footing as the today's breakout move develops.
A close back below this week's low at $57.25 would indicate a failed rally. On the upside, a challenge of heavy resistance between $63 and $64 may be on the horizon. This zone marks the stock's 2015 high.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long SBUX.