SBUX Bull Market Descending Triangle Continuation Pattern
SBUX has been on a strong uptrend for quite some time now. Why stop now?
Recently it has begun to make lower highs while maintaining a floor around $53. To me this is pattern is best described as a bull market descending triangle continuation pattern (an explanation and diagram of this can be found in the idea linked below). With a buy in between $52.50-$53 this trade has a great risk/reward ratio. Stop loss should be outside of this structure between $52.50 and $51.50, with $52.50 offering an incredible risk/reward but also a better chance to get stopped out.
First target is the top of the triangle, where I will adjust stops to break even and watch price action. I am not sure if TP2 should be the equivalent move to the flagpole I have drawn (~$75), or the height of the triangle when it originated ($66-69 depending on where breakout occurs). I will have to research this further -- this idea may prove useful as to which to choose in the future as well.
Thanks to Wave-Trader for the information on how to recognize this pattern!
Recently it has begun to make lower highs while maintaining a floor around $53. To me this is pattern is best described as a bull market descending triangle continuation pattern (an explanation and diagram of this can be found in the idea linked below). With a buy in between $52.50-$53 this trade has a great risk/reward ratio. Stop loss should be outside of this structure between $52.50 and $51.50, with $52.50 offering an incredible risk/reward but also a better chance to get stopped out.
First target is the top of the triangle, where I will adjust stops to break even and watch price action. I am not sure if TP2 should be the equivalent move to the flagpole I have drawn (~$75), or the height of the triangle when it originated ($66-69 depending on where breakout occurs). I will have to research this further -- this idea may prove useful as to which to choose in the future as well.
Thanks to Wave-Trader for the information on how to recognize this pattern!
Comment:
Fibonacci -- has went a little below the .5 but closed the week above it. The more confluences the better!
Fibonacci -- has went a little below the .5 but closed the week above it. The more confluences the better!
Trade active:
Trade active at 52.75. Stop loss is currently at 52.40.
Today the price again found support on the triangle, making a slightlyy lower high.
The risk:reward looks very good here: even a retracement back to the .382 of the drop from the top of the triangle offering a 1:5.5 Risk:Reward. The top of the triangle is close to 1:12.
So I am opening a small position here, using .5% (yes, half a percent) risk.
Perhaps a second position could be opened upon the breakout of the next structure which forms by the bottom trend line of the triangle.
(For educational purposes, I will also keep track of a Butterfly Call Spread for the Jan 17 expiration. It is a 52.5/60(x2)/62.5 call @ about 1.96 per contract. These dates and this spread are pretty random but the maximum profit is around a 1:2.5 risk:reward and would happen if SBUX closed at $60 at expiration.)
Trade active at 52.75. Stop loss is currently at 52.40.
Today the price again found support on the triangle, making a slightlyy lower high.
The risk:reward looks very good here: even a retracement back to the .382 of the drop from the top of the triangle offering a 1:5.5 Risk:Reward. The top of the triangle is close to 1:12.
So I am opening a small position here, using .5% (yes, half a percent) risk.
Perhaps a second position could be opened upon the breakout of the next structure which forms by the bottom trend line of the triangle.
(For educational purposes, I will also keep track of a Butterfly Call Spread for the Jan 17 expiration. It is a 52.5/60(x2)/62.5 call @ about 1.96 per contract. These dates and this spread are pretty random but the maximum profit is around a 1:2.5 risk:reward and would happen if SBUX closed at $60 at expiration.)
Comment:
Here we gooooo!
Currently up 1.6% from entry. Since using .5% of account = 0.8% account growth so far!
(The option spread is up 19.4% -- whoa!)
Here we gooooo!
Currently up 1.6% from entry. Since using .5% of account = 0.8% account growth so far!
(The option spread is up 19.4% -- whoa!)
Comment:
Nice!
Option spread now worth ~2.63 (34%!)
Stock up 3.1%.
Stops moved to break even, now we can have fun and enjoy the trade with no risk to our account!
Nice!
Option spread now worth ~2.63 (34%!)
Stock up 3.1%.
Stops moved to break even, now we can have fun and enjoy the trade with no risk to our account!
Comment:
Updated view. The trade above was stopped out but I am going to keep it as active as it looks like the structure is still valid.
(For reference the option spread is now around $1.88)
Updated view. The trade above was stopped out but I am going to keep it as active as it looks like the structure is still valid.
(For reference the option spread is now around $1.88)
Comment:
The above update is a reminder that when options are up it is best to take profit before they decay further!
Comment:
Weekly Update at 11:50 AM 11/18
Looking great. Watch price at current action point
For reference the option spread is now around $10.18!
Weekly Update at 11:50 AM 11/18
Looking great. Watch price at current action point
For reference the option spread is now around $10.18!
The low of the week was 52.67 and price closed the week at 53.08. This was right in the buy zone discussed in the original post, but as I am not doing this full-time yet I was not able to catch it in real time.
These dark blue lines represent two patterns to watch on the lower time frame. If the price enters the 52.60-53 area again, or shows strong price action next week, we can consider going long with a stop loss as high as 52.40. I can see this pattern developing into a bearish channel so a tighter stop loss is preferred since this the price on this time frame has been making lower highs and lows and if 52.50 is broken we may see further downside.
I need to still get familiar and comfortable with the pro-cyclical mindset and learn how to better trade this based on a breakout!