Starbucks Corp (SBUX) shares dropped almost 5% after providing disappointing second quarter earnings guidance. The company forecasted a second quarter profit of $0.38 to $0.39 a share, lower than analysts’ consensus $0.40. Starbucks also reported first quarter figures that came roughly inline. The company explained that comp sales in Europe, Middle East and Africa were hurt by the Paris attacks.
Price action on the Starbucks 240-minute chart shows the after-hours drop may found tentative support from the bearish channel that formed in November. If price drops below this key technical pattern, we could see further pressure target the $53.00 zone, which is the 50.0% Fibonacci retracement of the $42.05 to $64 rally. A break below that region could open the door for a deeper drop towards the psychological $50 handle. It is around that area that we could see value investors come buy this major dip.
If the current slide is short-lived, initial resistance will come from the $57.50 resistance level.
The Trade: Sell SBUX at $55.50, with a stop loss at $57.50 and a take profit at $50.50. The Risk/Reward Ratio is 2:5