One of the best stock market stories of this century has been the remarkable growth of Starbucks (SBUX) and over the past five years, I can only point to one thing that slows the price appreciation. Coffee prices. That seems simple enough to understand, but the chart below brings it to light visually. Have a look:
Those two red rectangles above highlight SBUX price stagnation during periods of rising coffee prices. We're currently in one of those price rise periods so it makes sense to keep an eye on this trend reversing before we expect any major surge in the SBUX stock price. Coffee prices have turned down a bit over the past two weeks and that has led to strength in SBUX shares. If you're looking for SBUX to percolate, see if coffee prices continue to drop.
Finally, the correlation indicator is another way to see that the SBUX stock price and coffee prices tend to move inversely to one another as the correlation factor typically remains below zero, suggesting that negative correlation.
Happy trading!
Tom
