This Bounce Is Making Buyers Wary

[Trading With Larry Benedict]( This Bounce Is Making Buyers Wary By Larry Benedict, editor, Trading With Larry Benedict Up until recently, coffee chain behemoth Starbucks (SBUX) has had a pretty forgettable year. It rallied 17% to its peak in early May but then reversed sharply, giving away all of those gains and more. By the time it bottomed out last month, it was trading down 10% for the year. Yet earlier this month, SBUX gapped higher off its Q4 earnings beat. And SBUX traded up around 20% for the month. Now that momentum is in danger of waning. So let’s check out what’s coming next… Recommended Link [Warning: “Catastrophic Event About to Hit America in November”]( [image]( Our U.S. Treasury Department has confirmed [this unprecedented war-related event]( is happening in Washington DC this month… And it could have drastic consequences for millions of Americans. Most people will be caught by surprise and they could be financially wiped out. [Click here to see the details and learn the three steps you need to take to protect yourself and your loved ones.]( -- Countertrend Rallies On the chart below, the 50-day moving average (MA, blue line) shows how SBUX initially rallied into the start of 2023. But the 50-day MA soon flattened out. And around the middle of the year, it started to slide: Starbucks (SBUX) [Image] Source: eSignal That slide began with SBUX’s reversal from its peak (‘A’) on May 1. That gap lower (a near 10% fall on the day) came despite SBUX announcing that it had substantially beaten Q2 estimates. This heavy selling sent the relative strength index (RSI) into freefall. And apart from a brief period in July, SBUX’s downtrend continued with the RSI stuck in the lower half of its band (below the green line). The 10-day MA also crossed below the 50-day MA. And both MAs bearishly tracked lower. Throughout SBUX’s prevailing downtrend, though, there were plenty of countertrend moves… We see that with SBUX’s bounces in June and July and again in August and October. Take another look: Starbucks (SBUX) [Image] Source: eSignal These moves coincided with the RSI rising from near oversold territory (orange circles). In the first three moves, SBUX was unable to maintain a rally. The RSI failed to gain traction in its upper range too. Yet in this fourth move, SBUX was finally able to break higher. This time, the market reacted positively to SBUX’s Q4 earnings beat. That caused it to gap substantially higher. SBUX has continued to climb since then. It is now trading up around 20% from the start of the month as buyers have scrambled to get on board. But the strong surge has also put the RSI into overbought territory. So what am I looking for around here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Buyers Exhausted When stocks rally as quickly and strongly as SBUX, new buyers become increasingly wary the longer that rally goes. They’re worried that profit takers could send the stock lower soon. This can lead to a sudden downturn in momentum. And that’s why I’ll be watching the RSI. The RSI is tracking lower (lower orange line) and diverging from the SBUX stock price (upper orange line). That’s a common reversal pattern. From here, if the RSI keeps falling, that could soon pull SBUX into a quick reversal. And that could provide the setup for a potential short trade. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Are you planning to trade SBUX? Tell us about it at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [“I Trade ONE Stock for a Retirement Fortune and I Ignore ALL Market Crashes!”]( When the market crashes, and trillions of dollars vanish from investor hands… Millionaire Trader Jeff Clark will once again use his [ONE stock secret]( to collect huge gains in as little as 8 days… Regardless of if the market is UP or DOWN. [Click Here to Discover This Controversial Secret.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2023 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](