Price has been trading steadily within a long term bullish Uptrend Channel, since Jan 2011 up till today (24 July 2014) Price has recently trace from High of around $81.00 (26 Nov 2013) and found support along the Uptrend Channel Line. We also note a minor double bottom (31 Jan 204 - 16 May 2014) within the Channel. This indicates a reversal of the bearish retracement move, for a continuation of the general uptrend
We note a similar double bottom (06 Aug 2012 - 22 Oct 2012) within a trend channel, which leads to price reaching around $81.00 (06 Nov 2013). We project that the price action now will attempt to proportionately replicate this upward movement once more, leading to a breakout.
For price to breakout, it must successfully trade and sustain above the resistance band between $81.60 to $80.00
Theoretical Price Projection: $97.36 ( Proportional Projection of Retracement/ Up move)
Time Span: Price should complete the up move by 30 Jan 2015
Price will also most likely respect and trade within the Uptrend Channel line, until a reversal pattern forms.
Risk: There is a risk of bull trap, whereby price breaks slightly above the Resistance Band, trade back below 80.00 to form a Double Top Reversal pattern to reverse the uptrend.
Very informative study. Thnks. Have several questions. It tested 83 in after hours trading after ER and bounced to 78. But, it doesn't break down intermediate up channel rising from long term TL (1). Resistance band proved strong. Do u think it will more likely test the bottom of the channel 1 or continue clamping inside intermediate term channel? Here is my little study tradingview.com/v/4HB4Dev0/
BreakOutArtist
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Hi Trader2014,
I like how you reference Thomas Bulkowski's Encyclopedia of Chart Patterns in your study. It is a good reference material for price action traders out there.
Your question is a challenging one and I'm sure many SBUX traders have the same query in their mind.
Here's my take:
1) Firstly, I will disregard all price action that occurs during After-Market Hours (AMH).
This is because:
a) We do not have full market participation during AMH, therefore the price action during the period is not truly reflective.
b) The charts that are available to most traders, do not include data during AMH. For example I do not see SBUX being traded at $83.00 on my TradingView Charts. Therefore, for consistency of data used in our analysis, it is better not to take into account AMH.
2) Secondly, you can try taking your study and switch it to the 1 Week Period. This will remove the fuzziness of the Earnings Release (ER) price action and provide a clearer picture. You will note that the the currently Eve & Eve Double Bottom is in the 'Throwback' phase, which statistically happens around 50% of the time. Also take note how the Throwback is building up nicely within channel 1. From experience, throwbacks are short term affairs and unlikely to drag out sideways for long periods. In other words, for price to drag sideways to the intermediate term channel is unlikely.
3) Thirdly, let's go back in time and look at the similar formation that happened a year before. You will note that the price action channeled itself out of the double bottom, much like the channel 1 that you have drawn currently. If we assume that price action is going to mirror itself once more, it is likely your current channel 1 will hold, just like it did 1 year before. Do take note that the channel will break down eventually.
Conclusion:
Therefore in my opinion, there is a higher probability that price will hold your channel 1 for the short term period (1 week -2 weeks).
BreakOutArtist
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Thank You HermanBrummer. Perhaps the Earnings Report will drive the price through the resistance band...
HermanBrummer
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nice chart and analysis, but a bit rich for my blood, looks like it will pull off though