Starbucks just hit a 52-week low, but one trader says it’s about to wake up

Starbucks has been struggling lately, with shares of the coffee colossus falling 11 percent in 2016, and touching the lowest level in more than a year Tuesday. But the stock's slide has options trader Andrew Keene looking to make a play on the name.

"I think Starbucks has gotten sold off pretty hard, a lot of selling pressure, but it could consolidate and move even higher," Keene, CEO of AlphaShark, said Thursday on CNBC's "Trading Nation."

He points out that even though Starbucks shares have been dropping recently, the 100-week moving average, a smoothing mechanism that tracks the last two years of trading, has been rising rather consistently. Keene believes that Starbucks will follow its own moving average higher.

If Starbucks shares do bounce, how high could they go? Keene sees the coffee kingpin retaking the $57.50 level at which it traded in August. That would represent a 7 percent rally from Thursday's closing price.


Part of that climb could be fueled by coffee chain's continuous effort to also look abroad for opportunities. Starbucks stock actually jumped more than 1 percent on Wednesday after the company appointed the first CEO of its China division, Belinda Wong, following on an announcement made last week that Starbucks would double its number of stores in China by 2021.

The company also has plans to open grandly designed "Reserve Roastery" locations in Tokyo and Shanghai to increase its worldwide reach.

In order to play for his expected move, Keene is buying a "bull call spread" on Starbucks, which in this case entails buying the January 55-strike calls and selling the January 57.5-strike calls for a total of 80 cents per share, or $80 per contract.

If Starbucks in fact closes at or above $57.50 on Jan. 20, this spread will be worth $250, meaning that he will more than triple his money. On the other hand, if Starbucks shares fail to rise, that entire $80 will be lost.

Starbucks is scheduled to report earnings Nov. 3.

Trader takeaway: Andrew Keene is bullish on Starbucks and is buying the bullish January 55/57.50 call spread in an attempt to capitalize on a rally.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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