Friday's trading session for the broader market has been choppy so far but that’s not what’s weighing on Costco, at least not as much as the company’s quarterly results.
Costco’s earnings weren’t necessarily horrible. But the report lacked the firepower that investors wanted to see in order to bid shares up to new highs. While the retailer beat on earnings, it came up short on revenue while comp-store sales growth met expectations.
Again, not bad. But there just wasn’t enough there to cause a breakout in Costco stock and send it to new highs. On the plus side, the recent report and mixed reaction does make Costco a worthy selection for Real Money’s Stock of the Day.
Let’s look at the charts.
Trading Costco Stock
A look at the charts clearly highlights resistance at $306. That was the breakout level we were watching for in Costco stock in the event that shares reacted bullishly to the most recent quarterly results.
We also took a look at the downside though. In the preview, we wrote that “bulls will want to see the 100-day moving average hold as support.” As of now, that’s exactly what we’re seeing.
Keep in mind though, shares are down less than 2% after what many view as an underwhelming earnings report. It could mean that COST stock isn’t able to hold up over the 100-day moving average. In the event that Costco trades lower, see if the $282.50 area buoys the name.
This zone was resistance in July, but support in September and October when the stock was pulling back. It’s also near where the 78.6% retracement comes into play, at $281.82. Below that could bring up a test of the 200-day moving average.
Of course, it’s possible that the 100-day moving average holds as support and/or Costco stock doesn’t test down to the $282.50 level. In the event of a rally, let’s see if shares can push above downtrend resistance (blue line) and reclaim the 50-day moving average.
The 50-day was support earlier in the year, but so far this month it has been acting as resistance. Clearing this measure would be an important development for sending Costco stock up to range resistance near $306.