Excluding portfolio management and diversification, if investors were long just Costco Wholesale (COST) and didn’t read the news, they wouldn’t know the market is in a correction.
The stock has been in an impressive uptrend, something both traders and investors love to see.
“Stick with the trend until it bends,” is a common phrase known on Wall Street. If we abide by that, then there’s no reason to be bearish on this retailer.
Costco stock is climbing again on Thursday, up about 3% and hitting all-time highs. The move comes after the company’s impressive March sales report.
Comp-store sales for March increased 17.2% while net sales climbed 18.7% year over year to $21.61 billion. Even if we exclude gas and forex changes, comps still climbed 12.2%.
On the e-commerce side, comps climbed 8.9% and when excluding the above factors, online sales grew 9.2% last month.
All around, it was an impressive report and one can see exactly why the stock has been so strong. The main argument from the bears has been valuation, and while Costco does command a rich premium, it’s hard to find the trend that’s in place.
Now investors are left wondering when they'll get another special dividend.
Trading Costco Stock
Chart courtesy of TrendSpider.com
Costco stock bottomed in late February with the rest of the market. However, unlike the indices and many individual names, it did not correct lower in March.
Instead, it continued to grind higher along short-term trend support. It doesn’t take a master trader to see how Costco stock has been riding the 10-day moving average, which has been strong support for almost a month now.
Last Monday March 28, Costco erupted off the 10-day and cleared four days worth of highs. That kickstarted the weekly-up rotation and the breakout over the prior all-time high near $571.50.
Once it broke out, Costco was able to hold up over this level and recently retested the 10-day moving average yesterday. That preceded today’s pop as shares momentarily cleared $600.
If we take a longer-term view, bulls may be shooting for the $622 to $635 zone, with conservative traders leaning toward the former and more aggressive bulls leaning toward the latter.
In the short-term, $597 to $600 is the first target of the current rally. On a further move higher, $612 is on the table.
As for the downside, Costco stock may pull back, but there’s no real concern among the bulls unless it loses the 10-day and $671.50 level. That may put the 21-day moving average in play, but we’ll deal with that if and when it comes to fruition.
