4 Trade Ideas for Costco: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Costco, $COST, had a volatile time for the 4 months following the start of the pandemic. The stock eventually settled in and ran in a trend to a top at the end of November. This was at a price that was over a 200% extension of the retracement of the pandemic drop. It pulled back from there, retracing 88.6% of the move up before bouncing in March. Since then, it has move back higher and is consolidating against resistance and over the 200% extension.

The RSI is rising in the bullish zone with the MACD curling up after a reset lower. There is resistance at 388 and 392.90. Support lower comes at 381.50 and 376.50 then 372. Short interest is low at 1%. The stock pays a dividend with an annual yield of 0.82% and has been trading ex-dividend since April 29th. The company is expected to report earnings next on September 22nd.

The June options chain shows open interest building from 385 down to a peak at 360 and then large at 350 on the put side. On the call side it is biggest at 370 and 400. The July chain is spread from 385 to 350 on the put side and much bigger and focused at 390 then 400 on the call side. The October chain is the first to cover the earnings report and has open interest focused at 350 on the put side. It is biggest at 360 on the call side and the spread higher past 420.

Costco, Ticker: $COST

Trade Idea 1: Buy the stock on a move over 388 with a stop at 378.

Trade Idea 2: Buy the stock on a move over 388 and add a July 385/360 Put Spread ($5.85) while selling the October 420 Call ($5.75).

Trade Idea 3: Buy the June/October 400 Call Calendar ($11) and sell the July 360 Put ($1.50).

Trade Idea 4: Buy the October 360/390/420 Call Spread Risk Reversal ($3.30).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which since Summer has unofficially begun with the passing of Memorial Day, saw equity markets end the week stronger after large caps rebounded from a weak start.

Elsewhere look for Gold to continue its uptrend while Crude Oil moves to new multi-year highs. The US Dollar Index and US Treasuries continue to consolidate in their downtrends. The Shanghai Composite looks ready to continue higher while Emerging Markets resume their uptrend.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts show moves to the top of consolidation ranges on both timeframes. The QQQ looks the most promising on the shorter timeframe with the SPY next and the IWM building a tight pattern. On the longer timeframe all three are consolidating with strong momentum. Use this information as you prepare for the coming week and trad’em well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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