Don't Ignore This Chart!

Costco Breaks Triangle Line with Big Gap


Costco (COST) is showing some upside leadership this year with a triangle breakout and challenge to the January high. 

Long-term trend identification is important because it sets my bias going forward. My bias is bullish when the long-term trend is up and this means I favor bullish patterns over bearish patterns. The overall trend is clearly up because Costco hit a 52-week high earlier this year, the 50-day moving average is above the 200-day and price is above the 200-day. 

COST stalled after hitting the new high and formed a big triangle from late January to early April. A consolidation within an uptrend is typically a bullish continuation pattern. The breakout signals an end to this consolidation period and a resumption of the bigger uptrend. 

The breakout zone in the 188-190 area turns into the first support zone to watch on a throwback (blue shading). A throwback occurs when prices return to the scene of the breakout. Broken resistance is expected to turn support and this is an area to watch for a bounce.  

The indicator window shows the performance lines for SPY (red-dashed) and COST (black). Both are up double digits over the past year, but COST has a slight edge with a 19% gain. SPY is up a respectable 16% since late April 2016. 

Plan Your Trade and Trade Your Plan.

- Arthur Hill, CMT

Senior Technical Analyst,

Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill

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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