Costco, A Market Barometer

• Posted by Greg Harmon
• on August 15th, 2013

Some stocks can play a role beyond a trading vehicle or a store of wealth. Some of them can also act as a barometer on the entire market or at least a segment of the market. One of those for me is Costco, $COST. It has continually moved higher off of the low in November with a few pullbacks along the way. The chart below shows that it has been running up in a rising channel. The latest leg lower comes after a false break out above the top of the channel. Why it is important to me

right here and right now is three fold. First the form of the rise resembles that of the broad market close enough. Next it is pulling back to the channel support which has held 6 prior times in this move higher. Finally it is also at the 100 day Simple Moving Average (SMA) that has been significant. What do you use as a market barometer?

The Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD) both support a continued push lower. If it does continue to fall I will start to lose some faith in this longer term uptrend. A hold and reversal here, or even on a slight break of the channel, would keep the bullish fervor.

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