Coinstar (CSTR) Upside Potential


Coinstar Inc (NASDAQ: CSTR) is in the business of automated retail via self-service interactive kiosks. The two main businesses are the redbox® DVD rental and Coinstar® coin-counting.  While there are about 19,000 Coinstar Center® machines in supermarkets, drug stores and the like the DVD rental business accounts for 70% of revenue while coin counting is about 17% of revenue.   

If we look at the weekly chart going back to 2008 we note two clear technical patterns.  One is the up-trending channel (blue lines) and the second one is the horizontal resistance/support line (red).

The horizontal line at $38.50 dates back to May 2008 where it acted as resistance until May 2010.  After that it has held as important support ever since and in February of this year coincided with the blue up-trending channel.  Speaking of the blue channel; note that in early June the stock bounced hard off the lower line and currently resides right in the middle of the channel.


On the daily chart for 2011 we note a horizontal resistance/support line dating back to May 2010, which has acted resistance and support several times over the past twelve months and yesterday Coinstar Inc (NASDAQ: CSTR)  again overcame that level with a solid rally higher.


The trade I see setting up here is straight forward: Open long near yesterday’s close or $58.80 or better with a target at the 2010 highs near $67 and stops can be set at $55.

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