Don't Ignore This Chart!

Costco Forms Bullish Pennant Near Breakout


Costco (COST) fell on hard times this summer with a plunge from the low 180s to the 150 area. Despite this gap and sharp decline, the stock firmed in July-August and surged above the red resistance zone in September. Notice that the stock found support in the 150 area with two bounces and this could be considered a double bottom (green zone). The intermittent highs mark a resistance zone in the 161-162 area and the stock broke this zone in mid September. Technically, there is a higher high and a double bottom breakout is in the making. 

COST was a bit overbought after a 9% surge from late August to mid September. It looks like the stock is working off this condition with a pennant formation. These are continuation patterns and a breakout at 163 would signal a continuation of the prior surge. Another 9% move would target further strength to the 174-175 area. 

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--Arthur Hill CMT

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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