Costco Wholesale Corporation (NASDAQ: COST)

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. The company offers branded and private-label products in a range of merchandise categories. It offers candy, snack foods, tobacco, alcoholic and nonalcoholic beverages, and cleaning and institutional supplies; appliances, electronics, health and beauty aids, hardware, office supplies, cameras, garden and patio, sporting goods, toys, seasonal items, and automotive supplies; dry and institutionally packaged foods; apparel, domestics, jewelry, house wares, media, home furnishings, and small appliances; and meat, bakery, deli, and produce. The company also operates gas stations, pharmacies, food courts, optical dispensing centers, one-hour photo centers, and hearing aid centers; and travel businesses. In addition, it provides business and gold star (individual) membership services.

To review Costco’s stock, please take a look at the 1-year chart of COST (Costco Wholesale Corporation) below with my added notations:

1-year chart of COST (Costco Wholesale Corporation)

From July through October, COST formed a nicely defined rectangle pattern with a $120 resistance (blue). That resistance was also the 52-week high. After breaking through that resistance in November, the stock moved higher as expected. Now, as can commonly occur, the stock seems to be pulling back to the old 52-week high breakout point. The $120 that was previously resistance should now act as support if the stock gets there.

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The Tale of the Tape: COST broke out to a new 52-week high and has now pulled back. A long trade could be made at $120 with a stop placed below that level. A break below $120 would negate the forecast for a continued move higher.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach