Stock of the day: Costco

We’ll wrap up the week with an analysis of Costco. Two weeks ago, Costco’s price created a very nice sell signal, but the most recent upswing on the global markets put it into question.

A sell signal on Costco comes from the head and shoulders pattern (orange), which emerged in the middle of the holiday season. On August 26^th, Costco dropped, breaking two crucial supports. The first one was the neckline of the head and shoulders pattern (red), and the second one was the mid-term up trendline (black). A breakout of those two lines, according to price action rules, is always a very strong signal to sell.

The price did follow that sell signal but without any bigger encouragement. This week, for example, was bullish for Costco, which may be a start of a bigger reversal. What we need for a buy signal here is a breakout of the green down trendline and a comeback above the red neckline. 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.