The Range Is Tightening in Starbucks

Published on Wednesday, 16 May 2012 08:20 Written by TradersHuddle Wire

New York, May 16th (TradersHuddle.com) - Shares of Starbucks Corporation (NASDAQ:SBUX) closed the trading session at $53.34 with its price action in a very tight range, given that calculated support is set at $53.05 and the calculated resistance is set at $55.74.

Starbucks Corporation (NASDAQ:SBUX) retails, roasts, and provides its own brand of specialty coffee. The Company operates retail locations worldwide and sells whole bean coffees through several distribution channels. Starbucks also produces and sells bottled coffee drinks.

Starbucks' stock price action indicates that both sellers and buyers are materializing very close to each other. This signals an area where momentum is building, since the stock can resolve by breaking out of the developing tight range.

Traders wanting to establish a position should pay close attention to Starbucks' price action, as any movement outside its predefined range of $53.05 and $55.74 could grasp the attention of momentum buyers that look for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support could spark above the average selling. A tiered approach could be the best way to start a position; enter into it while the stock is in the tight range, and then add to this position as it breaks and closes above resistance.