For his "Executive Decision" segment of Mad Money Tuesday night, Jim Cramer sat down with Craig Jelinek, CEO of Costco Wholesale Corp. (COST) , the retailer with shares up 50% over the past 12 months.
When asked for the secret to attracting nearly 100 million members to its stores, Jelinek said it's because they take care of their people.
Costco is not a high-margin retailer, Jelinek explained. They're about value and volume.
When asked about the company's first store in Shanghai, Jelinek said they were simply not prepared for the volume of customers they received. But they've learned a lot and have been making changes to their operations to accommodate the crowds.
Jelinek added that they're not worried about Amazon.com (AMZN) . They focus instead on lowering their prices and expenses and running as efficient an operation as possible.
Let's take a few minutes to focus on the charts of COST.
In the daily bar chart of COST, below, we can see that prices have made a new high for the move up. Prices traded sideways around $300 for four months before the breakout to the upside. COST is above the rising rising 50-day moving average line as well as the bullish 200-day moving average line.
The trading volume has been heavier since the end of August and the daily On-Balance-Volume (OBV) line has made a new high for the move up to confirm and support the price gains. Buyers of COST have been more aggressive than sellers.
The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line this month for an outright go long signal.
In the weekly bar chart of COST, below, we can see that prices have risen the past three years and share prices have more than doubled. COST is trading above the rising 40-week moving average line and tests of the line turned out to be buying opportunities.
The weekly OBV line shows a long rise and tells us that investors have been accumulating shares for a long time.
The MACD oscillator is in a take profits mode but turning upward for a new outright go long message.
In this Point and Figure chart of COST, below, we use daily price data to construct the chart. Here a potential upside price target of $356 can be seen.
Bottom-line strategy: Hold existing longs and raise stop protection to a close below $300. Consider adding to longs or initiating longs on any dip toward $310. Our Point and Figure price target for the first quarter of 2020 is $356.