SBUX and Coffee Futures

my last post on SBUX saw the 73 area as the potential price target to finish a parabolic run.  it worked for almost a month but ultimately was defeated.

so like any good chartist it was “erase” and back to the drawing board.

one would think, as I did, that the price of coffee would certainly be a pretty close inverse relationship to the performance of SBUX.  not making any excuses for my no “economic courses” world but if the price of coffee goes up or down then wouldn’t that affect profitability?  here’s the chart …

Coffee (line) and SBUX (candles) plotted together ...
Coffee (line) and SBUX (candles) plotted together …

I can look at this one till I am blue in the face and I really can’t see any correlations … in fact, they both took off together for 10 years and, back in 1997 as prices came tumbling down (as now) SBUX just kept rising.  this confused me …there has to be “some” correlation doesn’t there?

so on this wonderful fall morning it came to me “why not try the relative strength of coffee vs SBUX using ratio analysis (KC #F / SBUX)?”  and, well, there it was … when Coffee has LESS relative strength (candles are going down) then SBUX rolls like the Crimson Tide.  however, when the price of Coffee starts to outperform on a relative strength basis (the candles go up) then the price of SBUX flips on a dime.  Picture paints a thousand words …

relative strength of Coffee/SBUX.
relative strength of Coffee/SBUX.

so, as someone who is a pure PATTERN recognition chartist, naturally I want to find the PATTERN on this ratio that will signal a bottom and cause the price of SBUX to crack and, once again, prove Sir Isaac Newton correct that something that goes UP will, ultimately, come down.  (read: gravity)  This move in SBUX is amazing .. what is even more amazing is noting the ratio support, once broken in 06/2012 (blue horizontal line at bottom right of chart) is when the parabolic advance really began in earnest …

ending diagonal and bullish divergence present for the ratio
ending diagonal and bullish divergence present for the ratio

there isn’t a clear pattern coming into play as I look at the monthly and weekly charts …standard projection/extension techniques have targets that are (-) numbers and that “dog don’t hunt” so we can use RSI bullish divergence (present), contracting ending diagonal like pattern (present), very little volatility (note the small candles) (present) and the fact that we are coming to extremely important support on the continuous contract (.786 retrace from a monthly node)

Coffee Continuous Contract Monthly approaching major support
Coffee Continuous Contract Monthly approaching major support

if not NOW then, in the very near future, believe 1) Coffee will find significant support and 2) the relative strength of Coffee vs SBUX will bottom and start back up and 3) this will cause the parabolic advance of SBUX to flame out …. it is inevitable.

SBUX potential targets and count that doesn't break any rules (valid (?))
SBUX potential targets and count that doesn’t break any rules (valid (?))

Author: BART

BART is a CMT and an expert a "advanced" pattern recognition used w/in the intermarket analysis discipline. He's also an accomplished Business Development Executive providing solutions to a myriad of business markets.

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