Something Brewing in SBUX

I see a possible "W" pattern forming in SBUX and think its a great time to go long some shares or call options at these levels as it presents a very favorable risk/reward. Starbucks announced terrible earnings on Monday after the close and the stock gapped down and opened at 9.50 on Tuesday. It rallied back and was actually positive late in the day getting to 10.27 before closing at 10. The volume was strong at 26 million. Stochastics are also getting towards an oversold level and may start to turn up. Whenever you see a stock react POSITIVELY to bad news, its telling you something. In this case I think SBUX is saying that it wants to go higher.

I would buy a half position in the stock here at 10.00 and add the other half on confirmed strength over 10.3 Wednesday. Keep a tight stop below the 9.40 level or if you wanna risk a bit more keep your stop under 9 which is just underneath the 52 week low made last month. I do not see SBUX breaking that level but we are traders and must obey our stops like I always say. Predetermining your exit strategy is the best recipe for profits. I can see the stock getting to 11 quickly if this market behaves with eventually SBUX seeing 12-13. This is a swing trade and will probably be given no more than a few weeks to playout.

Assuming SBUX stays over 10 and builds strength on Wed. I will be buying some call options. I like the Jan 11 calls for 90 cents or better. Or if you wanna take a bit more risk try the Dec 11 calls for 65 cents or better. Again if SBUX shows weakness by week end or breaks under 9.40 you should cut your losses but this is a decent risk/reward setup I like here.