Head to Costco for its Stock

• Posted by Greg Harmon
• on March 17th, 2016

In my experience no Costco ($COST) has ever had a parking lot look like this, even when it is closed. This is obviously a photo-shopped picture. These stores are packed. From the people buying 35 heads of cabbage for their restaurant to the mom’s buying 4 lb packs of butter for making cookies, to the old people walking around and just eating samples all day, it is often difficult to navigate the aisles with my 50 rolls of paper towels.

It does not matter if the economy is in recession, flat or booming. But the stock is not always so steady. So when it pulls back I look for an opportunity to buy it on the cheap. One such opportunity may be presenting itself right now. Take a look at the chart below.

The weekly chart of Costco over the last 3 years gives many signals to read. First notice the dips in price back to the 50 week SMA. Every time it touches it or goes through it, the return back higher has been very profitable. This happened 6 weeks ago and the upside separation is just starting to happen.

The RSI is also a signal. Every bounce off of the bottom of the bull range, at 40, has started a run higher in the stock until the RSI has moved over 70. And the MACD at the bottom is similar. Every bounce off of zero has continued higher to about 5.

All of these signals are showing up as the stock price is pushing up against resistance at 154.50. A move over this would confirm another leg higher. The last two has given $45 and $40 moves. A similar move would put Costco stock over $180.

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