Costco Could Hit New Highs After Earnings Beat: Chart - TheStreet

Costco Wholesale (COST) - Get Report stock closed higher by 0.92% at $291.67 in Friday's trading session after the company reported its quarterly results.

Shares of Costco actually opened lower on the day, despite the overall market rallying after the September jobs report was released before the open. However, it took less than an hour for Costco stock to go positive on the day, leaving many investors wondering if new highs are on the way.

I wouldn't put it past Costco stock to hit new 52-week highs in the coming days and weeks. The price action has been quite healthy and support held up perfectly over the last few days. The one potential issue: The overall market.

Should the broader market begin to tailspin lower, it could drag COST stock down with it. Let's look at the charts to see what may be coming up next.

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Trading Costco Stock

Daily chart of Costco stock.

Earnings of $2.69 per share beat expectations by 14 cents, while revenue of $47.5 billion came up short of estimates by $210 million, despite growing 7% year-over-year.

It was a good quarter, but not necessarily a great quarter, which is why investors have been hesitant to bid shares higher. However, the charts look rather favorable.

For four straight sessions now, the 50-day moving average has been support for Costco stock. It also has support from the 78.6% retracement just below the 50-day. That gives traders a pretty clear risk/reward proposition, as a close below the recent low -- $281.60 -- would suggests the tides have turned.

A close below the 50-day likely brings up a test of the 100-day moving average near $272.50.

With COST stock clearly in rally mode right now, I want to see if the stock can clear $295 and reclaim the $300 mark. If so, it puts the previous high of $307.34 on the table, as well as a potential test of channel resistance north of $310.

A glance at the RSI indicator at the top, which measures how overbought or oversold a stock is, and a look at the MACD indicator at the bottom, which measures momentum, both indicate Costco stock could have more gas left in the tank. Both are shown via the blue circles on the chart. The RSI is far from indicating an overbought condition, while the MACD suggests momentum is turning in bulls' favor.

The keep-it-simple takeaway? Over the 50-day and Costco stock is OK.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.