4 Trade Ideas for Costco: Bonus Idea

• Posted by Greg Harmon
• on December 13th, 2021

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

Costco, $COST, comes into the week at a new all-time high after reporting earnings last week. This breaks the price out of a consolidation range around the 500% extension of the retracement of the pandemic drop. The RSI is moving higher in the bullish zone with the MACD positive and curling to cross up. The Bollinger Bands® are turning higher to allow a move up.

There is no resistance above Friday’s high. Support lower comes at 554.50 and 545 then 524 and 518 before 503. Short interest is low at 1%. The stock pays a dividend with an annual yield of 0.57% and has traded ex-dividend since October 28th. The company is expected to report earnings next on March 3, 2022.

The December options chain shows open interest is biggest at the 550 strike on both puts and calls. The January chain has biggest open interest at the 520 strike on the put side and is spread from 530 to 580 on the call side, biggest at 550. the March chain has open interest spread from 470 to 540 on the put side and building from 500 to a peak at 580 on the call side.

Costco, Ticker: $COST

Trade Idea 1: Buy the stock on a move over 562 with a stop at 542.

Trade Idea 2: Buy the stock on a move over 562 and add a January 550/520 Put Spread ($8.35) while selling the March 620 Call ($8.70).

Trade Idea 3: Buy the March 560/January 580 Call Diagonal ($21.00) while selling the January 520 Put ($5.00).

Trade Idea 4: Buy the March 500/560/580 Call Spread Risk Reversal (free).

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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 heading into December options expiration week, saw equity markets showed resilience with a rebound from an ugly prior 2 weeks.

Elsewhere look for Gold to continue in consolidation while Crude Oil may resume the uptrend. The US Dollar Index continues to trend higher while US Treasuries look to be back in consolidation. The Shanghai Composite remains in consolidation while Emerging Markets continue to trend lower.

The Volatility Index has moved back into the normal range making the path easier for equity markets to the upside. Their charts look strong, especially the large caps and tech stocks. On the shorter timeframe the SPY is leading with a new all-time high, then the QQQ just off the pace. On the longer timeframe both the SPY and QQQ look very strong. The IWM is now back in consolidation and floundering again. Use this information as you prepare for the coming week and trad’em well. 

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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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