4 Trade Ideas for Costco: Bonus Idea

• Posted by Greg Harmon
• on April 15th, 2024

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

Costco, $COST, comes into the week back at its 20 and 50 day SMA’s after a pullback that started with a gap down in early March. The RSI is trying to rise into the bullish zone with the MACD crossing up but negative. The leg up this time began after a 61.8% retracement of the last leg higher. There is resistance at 735 and 743 then 752 and 784. Support lower comes at 725 and 713 before 702.75. Short interest is low at 1.4%. The stock pays a dividend with an annual yield of 0.63% and will begin to trade ex-dividend on April 25th.

The company is expected to report earnings next on May 30th. The April options chain shows the biggest open interest at the 720 put strike and the 735 call strike. In the May chain it is biggest at the 725 put and 750 call. The May 31st Expiry is just getting started but shows an expected move of 6.57% between now and expiry, covering the earnings report, or about $48. Finally, the June chain has biggest open interest at the 720 put and 745 call.

Costco, Ticker: $COST

Trade Idea 1: Buy the stock on a move over 735 with a stop at 710.

Trade Idea 2: Buy the stock on a move over 735 and add a May 730/710 Put Spread ($11.95) while selling the May 760 Calls ($11.00).

Trade Idea 3: Buy the May/June 750 Call Calendar ($12.60) and sell the May 720 Put ($11.50).

Trade Idea 4: Buy the June 710/740/790 Call Spread Risk Reversal (85 cents).

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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 the April options expiration saw equity markets showing some cracks in the uptrends.

Elsewhere look for Gold to continue its uptrend, but with perhaps a short term pause while Crude Oil consolidates the move higher. The US Dollar Index looks to break to the upside while US Treasuries resume their downtrend. The Shanghai Composite looks to consolidate in its move higher while Emerging Markets consolidate in a broad channel.

The Volatility Index looks to continue to slow move higher keeping pressure on equity markets. The QQQ looks the strongest, especially on the longer timeframe as it consolidates while the SPY digests its strong move with a pullback. The IWM seems to have given up any chance of breaking out of the long consolidation as it falls back into the channel. 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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