Stock of the day: Costco

Today, we will circle back to the situation regarding Costco we analyzed on September 9. Back then, we were bearish and this is how we concluded our last piece:

“The price climbing above those two will be an invitation to buy. As long as we stay below, sellers still have an advantage and the main scenario remains bearish.”

The mentioned was a great call as afterwards, the price was going down almost every day for a whole month until October 14. What is the situation like now? Well, Costco is inside of a big symmetric triangle pattern. At the end of November, buyers tried to escape from this formation to the upside but they failed, which created the false bullish breakout (blue). A false breakout is a clear signal to go in the opposite direction and that is exactly what happened here.

Most probably, the price will now test the lower line of the triangle. In case of a breakout, we are going to receive a major sell signal but a bounce from this level can be a start of a small bullish wave. As for now, sentiment remains bearish.