4 Trade Ideas for Costco: Bonus Idea

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

Costco, $COST, printed a Golden Cross in April as it was consolidating a move up. It broke out of that consolidation at the start of June with a Morning Star reversal pattern. It continued higher for 4 months, using the 50 day SMA as support. It topped in September and has been in broad consolidation since, against the high as resistance and with rising trend support. This Ascending Triangle is being tested on the upper bound as it comes into the week. A break would give an initial target to 327.

The set up looks ready with the Bollinger Bands® opening to allow a move after a tight squeeze. The RSI is rising and strong in the bullish zone with the MACD lifting and positive. There is no resistance above 305.50. Support lower comes at 297 and 295 then 290 and 283. Short interest is low at 1.2%. The stock pays a dividend with an annual yield of 0.85% and started trading ex-dividend on October 31st. The company is expected to report earnings next on March 5th.

The February options chain shows the largest open interest at the 300 strike on the call side with large size from 290 to 315. On the put side it is biggest from 275 to 295. The March chain, the first to cover the earnings event, has biggest open interest at the 300 call with large size at 310 and 320. The put side is spread from 265 to 290 with the peaks about half the size. The April options show the biggest open interest at the 300 call and then at 330, but a large slug at the 250 put as well.

Costco, Ticker: $COST

Trade Idea 1: Buy the stock on a move over 305.50 with a stop at 298.

Trade Idea 2: Buy the stock on a move over 305.50 and add a March 300/290 Put Spread ($3.15) while selling an April 325 Call ($2.87) to help pay for the protection.

Trade Idea 3: Buy the February/March 315 Call Calendar ($3.15) and sell the February 290 Put ($1.24).

Trade Idea 4: Buy the April 290/310/320 Call Spread Risk Reversal (45 cent credit, selling the 290 Put to buy the 310/320 Call Spread).

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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 with January options expiration complete, saw equity markets strong but some approaching overheated levels.

Elsewhere look for Gold to continue its pullback in the uptrend while Crude Oil pulls back in the broad range consolidation. The US Dollar Index looks to continue to bounce in its downtrend while US Treasuries consolidate over support in their pullback. The Shanghai Composite looks to continue to consolidate in the uptrend while Emerging Markets move higher.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts also look strong on both timeframes. On the shorter timeframe both the QQQ and SPY could use a reset on momentum measures as both are extended and near extreme. The IWM is starting to catch up to them as it approaches the all-time high. 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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