Trading Idea: Is Starbucks close to Support?

Published on Wednesday, 18 July 2012 07:28 Written by TradersHuddle Wire

New York, July 18th (TradersHuddle.com) - Shares of Starbucks Corporation (NASDAQ:SBUX) finished near calculated support at $51.30.

The largest coffee shop chain in the world closed at $53.73 leaving shares at a level that will spark interest by traders wanting to start or add to a position in the stock.

Starbucks' stock range is defined by its calculated support defined at $51.30 and by the resistance level at $55.97.

The area where we expect for buyers to materialize is defined as calculated support. A stock trading near its support level might see a lift, if it provides the necessary support for traders to place their buy orders. However, if this area is breached, it will signal participants that the stock failed to entice buyers to step in and support the stock, which in turn will spur additional downward momentum.

Traders wanting to establish a position should pay close attention to Starbucks' price action, and establish it as close to support as possible, but only after buying materializes. Traders should understand that the resistance point at $55.97 might limit their upside, however, if the stock breaks resistance, it could be a good point to step in and add to the position.