Don't Ignore This Chart!

There's Only One Thing That Slows Starbucks


One of the best stock market stories of this century has been the remarkable growth of Starbucks (SBUX) and over the past five years, I can only point to one thing that slows the price appreciation.  Coffee prices.  That seems simple enough to understand, but the chart below brings it to light visually.  Have a look:

Those two red rectangles above highlight SBUX price stagnation during periods of rising coffee prices.  We're currently in one of those price rise periods so it makes sense to keep an eye on this trend reversing before we expect any major surge in the SBUX stock price.  Coffee prices have turned down a bit over the past two weeks and that has led to strength in SBUX shares.  If you're looking for SBUX to percolate, see if coffee prices continue to drop.

Finally, the correlation indicator is another way to see that the SBUX stock price and coffee prices tend to move inversely to one another as the correlation factor typically remains below zero, suggesting that negative correlation.

Happy trading!


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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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