Costco Wholesale Corporation (NASDAQ: COST)

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company provides dry and packaged foods, and groceries; snack foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances, electronics, health and beauty aids, hardware, and garden and patio; meat, bakery, deli, and produces; and apparel and small appliances. It also operates gas stations, pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and engages in the travel businesses.

Take a look at the 1-year chart of Costco (NASDAQ: COST) below with my added notations:

1-year chart of Costco (NASDAQ: COST)

Over the past two months, COST has hit the $165 resistance (red) on multiple occasions. In addition, the stock has been climbing a trend line of support (green) since the beginning of January. Together, these two lines have formed an ascending triangle on COST. Eventually, the stock will have to break either the $165 resistance or the triangle support.

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The Tale of the Tape: COST is winding up between two key levels. A long trade could be made at the triangle support or on a break above $165. A break below the trendline would be an opportunity to enter a short trade.

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