Starbucks shares just got a shot of energy.
The stock surged 3 percent Tuesday, extending its earlier gains, after hedge-fund billionaire Bill Ackman revealed a $900 million stake in the coffee chain. Shares have been on a tear of late, rallying nearly 16 percent in the past three months after initially plunging to start 2018.
But rather than jump right in, some market watchers say the stock has gotten a bit overheated.
“Shorter-term, we love that 17 percent move off the 2018 lows. But when you take the short-term and you put it in context of the longer-term chart, our positive enthusiasm starts to fade a little bit,” J.C. O’Hara, chief market technician at MKM Partners, said Tuesday on CNBC’s “Trading Nation.”
The stock has been primarily range-bound for the last few years. The stock has risen to the $63 per-share mark and failed to break above that level twice, and that gives some cause for concern.
“We really think that selling pressures are going to start to pick up a little bit, so we like the short-term momentum, but longer-term, we still think there’s plenty of resistance and there’s going to be some selling pressure now as managers reevaluate their longer-term holding positions,” O’Hara said.
While the short term could be choppy for the stock, long-term investors could be rewarded, said Boris Schlossberg, managing director at BK Asset Management, but near-term upside is likely capped.
“Starbucks has basically gotten most of the population to habituate to their product continuously, so it’s a very slow, steady, very, very good stock that way, and perhaps that’s what [Bill] Ackman is seeing in the future. I think in the long-term, it’s tremendous hold; short-term, I would rather just be selling puts at $50, selling puts at $45, all day long,” he said Tuesday on “Trading Nation.”
Starbucks shares closed higher by 2 percent on Tuesday, at $57.71 per share.