COST: Technical Strength Ahead of Earnings

24 May

Much of the Consumer Defensive industry and most Discount Stores have been in decline due to rising inflation. Many stores are struggling with lower revenues due to higher costs and their customers being more frugal during rising inflation periods.

COST is an exception with its massive strategy to buy food and common consumer necessities directly from producers and manufacturers and then use the Costco private label, Kirkland. The quality of the packaged food or clothing or other consumer product is the same, but with its ability to buy huge quantities, it has higher revenue growth after the pandemic that other stores would envy.

The stock needs to settle into a sideways or platform trend to pattern out some excessive pricing structure from last quarter. It reports May 30th and the trend implies that the report should meet or exceed estimates.

The previous Fundamental level is a Dark Pool Buy Zone, providing solid support. Pro traders followed that with a new pattern I call "the Nudge" which tends to lead upward momentum.