After posting disappointing earnings on July 29, Starbucks (SBUX) has been in a steady downtrend for the past two months. Meanwhile, the broader market continues to notch new all-time highs. With the upcoming FOMC meeting potentially signaling the start of a rate-cut cycle, the old market adage — “a rising tide lifts all boats” — could soon come into play. With that in mind, I’m scanning for stocks that haven’t yet reached overbought territory, and SBUX fits that bill. The stock remains in a downtrend, so patience and confirmation are key before stepping in. It’s worth noting that I’m not aggressively bullish here — the setup is structured so that even a modest 30-cent move in my favor could double the return on this trade. If you like trade setups like these, I open up my newly launched Trading Algorithm’s trade scanner for free for our CNBC readers on Tuesdays. Take it for a spin here. I am using three technical indicators for this trade setup as I need more confirmation. RSI (relative strength index) The Relative Strength Index (RSI) is a widely used momentum indicator and a reliable signal for potential reversals. When RSI falls to 30 or below, a stock is typically viewed as oversold. Traders often wait for the indicator to rebound above that threshold before treating it as a potential buy signal. That’s precisely the setup currently taking shape with Starbucks, suggesting the stock may be approaching an inflection point even as its broader downtrend remains intact. Directional movement index (DMI) The directional movement index (DMI) tracks market momentum using three components: DI+ (green), DI– (red), and the ADX (blue), which gauges the strength of the prevailing trend. When DI– is above DI+, sellers hold the upper hand. But when DI+ begins to rise as DI– weakens, it can mark the start of a momentum shift. On SBUX, DI+ is curling higher while DI– fades, signaling that bearish pressure is losing steam and bullish momentum may be taking hold. MACD (moving average convergence divergence) This indicator has become my favorite in recent history and I discovered it while I was developing my trading algorithm. The standard MACD uses settings (12, 26, 9) which are widely used but can be a bit laggy. For spotting trade setups, I often switch to MACD(5, 13, 5) for quicker reads. On SBUX, the MACD line (blue) is just about to make a cross above the signal line (yellow) and that is the final confirmation for this trade setup. The trade setup : SBUX 82-83 bull call spread With shares trading near $82.68, the structure is straightforward: buy the $82 call (in-the-money) and sell the $83 call (out-of-the-money) as a single package — offering both defined risk and defined payoff. If the stock chops around, the trade can be scaled by layering additional spreads. For instance, a dip toward $80 could present an opportunity to add an $80–$81 call spread, tightening risk while taking advantage of the pullback. Here is my exact trade setup: Buy $82 call, Oct. 10 expiry Sell $83 call, Oct.10 expiry Cost: $50 Potential Profit: $50 If SBUX finishes at or above $83 (the short strike) by expiration, the spread pays its full $1.00 value—turning a roughly $0.50 debit into a 100% return. Running 50 contracts risks $2,500 for a $2,500 max gain. -Nishant Pant Founder: https://tradewithmaya.com Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: (Nishant has an SBUX call spread expiring on Oct. 10). All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
