Starbucks SBUX rolled over and ready to sink

576 5 13
The SBUX             proposition is not a pretty picture from several angles: SBUX             edged out a profit for the year 2013             when the price of coffee             had dropped dramatically. The price of sugar             dropped also. I suppose what might be happening here is that investors are terrified that if SBUX             can't make money in a perfect world scenario, then it doesn't bode well going forward and prices need to reflect a more conservative valuation.

SBUX             is currently worth $53.8 Billion, 754.9 million shares outstanding, sales of $15.3 billion and historical margins in the 15% range (with not much hitting the bottom line). There are many analysts following the stock and only 2 have a hold rating and the rest have buys/outperform ratings with roughly an $85 price target. There is a lot of room for analysts to downgrade this stock, in other words. Sales have grown 7.5% a year for the past 5 years.

The technical picture is very dangerous because there are some very high profile days of heavy selling which I have marked in red triangles. It would be ideal to sell short against those triangles, but that would be too easy. Now we have to take a bit more risk and short at lower prices.

The biggest reason in the short term to short the stock is the massive run up in the price of coffee             . You can see how coffee             has impacted the price of SBUX             on the upside, but since January when the price of Coffee             took off to the upside, the price of SBUX             is barely down. Sugar             was also down HUGE last year and it too is rising and creating another bearish pressure on the margins of SBUX             .

10% downside risk with about 7% upside risk. If prices rise 3% from here the odds shift heavily towards a short position with better ratios. (13% downside with 4% risk).


Tim 2:03PM EST, 2/25/2014
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I posted the chart again as a short, yet clearly it has been stopped out. 2:42PM EST 3/13/2014
good stock picks.
I didn't know the exact correlation on the price of coffee, but noticed about a week ago negative trend line with a negative outlook using the Ichimoku Cloud and bought some OTM Puts that are already starting to look juicy.
i enjoy ur charts with analysis
clearly a broken trend line... nice correlation chart glad I came across this...looks like I'm probably going to buy some dec puts...
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