Starbucks is an example we’ll use to highlight a consistent process that we use everyday to our increase our margin of safety on investments. We’ll also discuss workflow that we use when speculating on options, day trades, and swing trades. Taken together, this way of thinking will set you on the right path to success.
Customers exchange their hard earned money in exchange for coffee, food items and merchandise. In turn, Starbucks makes sales and profits from its customer’s loyalty.
The key here; the company turns a profit and sales are increasing. These sales and earnings are directly related to the number of stores in operation.
In the November 3 earnings report, the company highlighted the opening of 763 “net” new stores during the quarter. The coffee chain ended the period with a record 35,711 stores globally. This includes stores that were closed during the period.
Comparable sales in North America increased more than 11% vs. +7.6% consensus, driven by an average increase of 10% per customer sale.
In addition, active Starbucks Rewards memberships rose 16% to 28.7 million in the domestic U.S. stores during the quarter.
- Price action is breaking out of a cup and handle base as of Thursday.
- Sales and store openings are increasing.
- Volume is above average.
- Institutions are accumulating shares as the stock makes higher lows.
- These are bullish indications.
Starbucks as an Investment
We’ve been buying for the past few weeks with a margin of safety, as taught by Benjamin Graham. And, we’ve been buying the stock at a discount to EBITDA.
We’ve only buy dips back to its bullish and rising 9/21d ema.
We don’t buy the high of the day.
Starbucks as a Daytrade Candidate
When conditions present an opportunity, as outlined herein, we also day trade the stock.
- Daily price action is in a bullish trend. 9/21/50d are moving “up and to the right.”
- Intraday price action is above a bullish trending VWAP.
- Relative volume (RVOL) is 2 times normal or higher.
- A news event, catalyst, or Tier One upgrade is causing traders to focus on the stock.
- If these criteria are met, the stock is said to be “in-play.”
The video below explains the process.
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