NEW YORK (TheStreet) -- Costco (COST) stock has been in a solid uptrend since September 2010. The members-only big-box retailer offers almost every product members would want or need. But Costco's longer-term uptrend was interrupted on Nov. 25, 2013, after it traded as high as $126.12. From this high the stock declined 13% to its 2014 intraday low at $109.50, set on Feb.4. The stock traded back and forth around its 200-day simple moving average between Jan. 8 and July 8 and then the momentum run-up returned.
So how should investors trade Costco stock after this momentum run and before its earnings announcement before the opening bell Wednesday?
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Last Friday Jefferies re-iterated its hold rating for Costco but upped its price target to $130 from $118. Such a call makes little sense when the stock is trading around $143.
When a stock is trading well above a price target shouldn't the stock have a sell rating? Maybe not. Here's how to trade Costco now, including exit strategies due to the stock's momentum status.
It's been quite a run. The rally from the 200-day simple moving average at $116.26 on July 8 to the stock's all-time intraday high set at $143.49 on last Thursday, Dec. 4, was a solid 23% climb. The jump Thursday was prompted by Costco's November same-store sale report, which showed a year-over-year gain of 9% -- the best number over at least the last two years. Analysts expect Costco to report earnings of $1.08 per share.
Here's the daily chart for Costco.
Courtesy of MetaStock Xenith
The daily chart for Costco ($142.33) shows how the momentum run stalled from a Nov. 26, 2013, high to the breakout above the 200-day simple moving average (green line) at $116.26 on July 8. The in-between low is $109.50, set on Feb.4.
The momentum runup of 23% is shown from the 200-day SMA at $116.26 on July 8 to the all-time intraday high set at $143.49 on Dec. 4.