COST - Buying in bulk

Come on. Admit it. You love to go to Costco as much as I do.

I wish when I needed mayonnaise I didn’t have to buy the 5 gallon jug or 144 rolls of toilet paper but hey, when we leave we are feeling good because we got some great deals.

The fundamental story Zacks makes says it nicely … “Costco continues to be a dominant retail wholesaler based on the range and quality of merchandise it offers. The company’s strategy of selling products at heavily discounted prices has helped it to sustain growth as budget-conscious customers continue to see it as a viable option for low-cost necessities.”

The current chart of Costco (COST) shows it had a 14% pullback that started in December of last year and bottoming finally in February. Notice how the bottom came in right at levels that have previously acted as support a number of times in the past. It has since chopped around looking to start a new trend. Chop or consolidation occurs when the bulls and bears are evenly matched with neither having a strategic advantage.  But we know that will eventually changes and long term investors prefer to invest in stocks that are trending not chopping sideways. The question is, will this resolve to the upside? Interestingly, it has created what looks to me as a bullish cup and handle continuation pattern that, if it breaks out of, projects to new all-time highs for the stock. The fact we had a golden cross on the moving averages earlier this week is in strong support of the bullish argument.

While the bullish case is compelling, Costco will not be immune to a fall if the market goes through a summer swoon. The logical levels of support if it does is first around 97 and then 92 where it gapped up.

Whether or not you’re a buyer or seller of their stock doesn’t take away from the fact, if you are like me, it’s  impossible to walk out without spending more than a hundred dollars (usually much more), which if you think about it, is another bullish argument for the stock.