We reviewed Costco Wholesale Corp. (COST) on December 10, where I wrote that "COST has a neutral trading range but the rising OBV line tells me that buyers have been more aggressive for weeks. After probing the downside a number of times in October and November the path of least resistance for COST is likely to be up. Aggressive traders can approach from the long side."
Unfortunately, COST gapped lower Friday. Let's check the charts again.
In this daily bar chart of COST, below, we can see that prices could not break above the early December highs and gapped lower this morning to test (and maybe close below) the rising 200-day moving average line.
The daily On-Balance-Volume (OBV) line was stalled in December and the Moving Average Convergence Divergence (MACD) oscillator looks like it has failed at the underside of the zero line.
In the weekly bar chart of COST, below, we can imagine that prices are trading below the rising 40-week moving average line. The weekly OBV line has been moving sideways the past three months but the move lower this week could tip the OBV line down.
The weekly MACD oscillator is still in a take profits mode from late September.
In this Point and Figure chart of COST, below, we can see a downside price target in the $188 area which is also a potential area of support (former resistance area on the way up).
Bottom line strategy: With the risk on the Point and Figure chart to the upper $180s or a retest of the early 2018 lows traders and investors should take appropriate action. I would not average down. I would not add to a losing position.