Starbucks Corporation (NASDAQ:SBUX) reached a new all-time high of $126.32 on July 23 but sold off almost 7% after its third-quarter earnings beat failed to propel the stock into a blue sky run.
On Friday, an institution purchased a massive block trade of Starbucks shares. The institution may believe Starbucks is set to reverse course and head back toward its all-time high or it may be using a dividend capture strategy to make a profit.
A dividend capture trading strategy is when a trader buys a large share block of a dividend-paying stock just prior to the ex-dividend date and then sells the block immediately after the dividend is paid out. Starbuck’s ex-dividend date is this Wednesday and it will pay the dividend on Aug. 27. Starbucks has a forward annual dividend rate of 1.8.
The Starbucks Trade: Below is a look at the notable alert, courtesy of Benzinga Pro:
- At 3:12 p.m. Friday afternoon, an institution purchased a whopping 636,576 shares of Starbucks above the ask at $118.91 per piece. The block trade represented a $75.69 million bullish bet.
See Also: How to Buy Starbucks Stocks
Why It Matters: When a block trade occurs it indicates a hedge fund or institution has taken a position in common shares. A block trade always involves large sizing and is typically handled by a blockhouse privately and outside of the open market. Because block trades don’t happen on the open market the large size of the trades doesn’t create volatility in the stock being traded.
These types of purchase orders are made by institutions purchasing a large number of a security and retail investors can find watching for block trades useful because it indicates “smart money” has entered into a position.
The Starbucks Chart: On July 1, Starbucks broke out from a descending trendline that had been holding it down since April 20. After breaking up from the trendline, Starbucks soared over 12% higher in an uptrend on the daily chart to reach its new all-time high.
On Monday, Starbucks was trading down about 1% lower but holding above a support level at the $117.57 mark. The stock has tested the level for the past five consecutive trading days and held above it indicating it's a key level.
On July 28 Starbucks left a gap between $123.48 and $124.24. Because gaps fill 90% of the time it is likely Starbucks' stock will trade up in the range in the future.
Starbucks is trading slightly below the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, which indicates bearish indecision. The stock is trading almost 10% above the 200-day simple moving average, however, indicating the overall sentiment in Starbucks is bullish.
- Bulls want to see Starbucks' stock continue to hold above the key resistance level near the $117 level and for bullish volume to come in and push the stock back up over the eight-day and 21-day EMAs. If Starbucks can regain the moving averages as support. it could tackle its next resistance level at $120.83 which would put it in grasp of the overhead gap.
- Bears want to see Starbucks lose its key support level. If Starbucks stock loses $117 it could trade down toward the $114.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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