Conclusion, Investment Implications, Strategy
Costco (COST) is at a major decision point and appears to be in an emerging major bearish trend change. A sustained decline below the $300.72 area would help confirm this and target an additional 18% decline to $247.00 per share.
Analysis and Rationale
Costco Wholesale Corporation (COST), together with its subsidiaries, operates membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range of merchandise categories. As of September 1, 2019, the company operated 782 warehouses, including 543 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in South Korea, 13 in Taiwan, 11 in Australia, 2 in Spain, 1 in Iceland, 1 in France, and 1 in China. It also operates e-commerce Websites in the United States, Canada, the United Kingdom, Mexico, South Korea, and Taiwan. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.
Chart 1 below plots COST daily since 2019 and points out what appears to be an emerging major bearish trend change. A sustained decline below the 200-day moving average, currently situated at $300.72 per share, would help confirm this and target an additional 18% decline to $247.00 per share.
Chart 1
Table 1 below shows, considering the aforementioned downside target and a protective stop placed above the $304.90 area, a short entry price of $299.58 would provide a 1:9.9 risk/reward ratio (risking $1.00 to make $9.9) with an initial risk of 1.8%.
Table 2
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