Costco Wholesale (COST) was downgraded to "Hold" by our quantitative service so it prompted me to check out the charts and indicators of COST.
In this daily bar chart of COST, below, we can see a rally from early April to a zenith in early September. From that September peak COST made lower highs until December when it declined $45 in a hurry. COST broke below the rising 200-day moving average line. The shorter 50-day line has had a negative slope since the middle of November and it is now close to crossing below the 200-day line for a possible death cross.
The daily On-Balance-Volume (OBV) line shows a peak in early November and its decline tells me that sellers of COST have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in early January for a cover shorts buy signal. It looks like this indicator has begun to narrow again towards another sell signal. The area above $220 is likely to act as resistance.
In this weekly bar chart of COST, below, we can see that prices are below the still rising 40-week moving average line. The decline in price to $190 pushed halfway into the $200-$180 support area and is not a sign of strength. If COST found buyers around $200 it would have been more constructive.
The weekly OBV line shows weakness the past two months.
The MACD oscillator is moving below the zero line for an outright sell signal on this longer time frame.
In this Point and Figure chart of COST, below, we can see a downside price target of $148 being projected.
Bottom line strategy: It looks like COST is stalling below the rising 200-day moving average line and well short of resistance that starts around $220 (the lows of October and November). Traders and investors should probably look elsewhere for stocks to trade from the long side. COST could trade lower in the weeks and months ahead.
