Short Trade Idea
Enter your short position between $1,000.95 (the lower band of its horizontal resistance zone) and $1,020.82 (the intra-day high of its last bearish candlestick).
Market Index Analysis
- Costco Wholesale Corporation (COST) is a member of the NASDAQ 100 Index, the S&P 100 Index, and the S&P 500 Index.
- All three indices trade within bearish chart patterns with rising downside catalysts.
- The Bull Bear Power Indicator of the S&P 500 Index is bearish with a descending trendline.
Market Sentiment Analysis
Equity markets sold off for a second day to start the session but closed the day notably off session lows as the Iran war concluded its fourth day. Yesterday’s rally was sparked after US President Trump announced the US would extend insurance to tankers passing through the Strait of Hormuz and provide military escorts to protect them against attacks. Equity futures are pointing to another sell-off this morning, as the war enters its fifth day. Today’s ADP report could inject volatility ahead of Friday’s NFP report. Earnings season is quieting down, but releases from Broadcom, Costco, and Alibaba will offer crucial insights into the AI trade and into consumer spending.
Costco Wholesale Corporation Fundamental Analysis
Costco Wholesale Corporation is one of the world’s largest retailers and the largest retailer of beef, poultry, organic produce, and wine. Over 30% of Americans regularly shop at Costco Wholesale Corporation, which drives value through its in-house brand. It currently has 905 warehouses serving more than 130 million members.
So, why am I bearish on COST ahead of its earnings release?
I expect Costco Wholesale Corporation to deliver an earnings beat on revenues and EPS, but the outlook might disappoint. So, I am turning bearish in the medium term, amplified by valuation concerns and the gradual decline in membership renewal rates. Competition from Sam’s Club, BJ’s Wholesale, Amazon, Target, Aldi, and Lidl is threatening foot traffic and adding to margin pressures. Tariff uncertainty adds to a cloudy outlook.
Metric | Value | Verdict |
P/E Ratio | 54.06 | Bearish |
P/B Ratio | 14.76 | Bearish |
PEG Ratio | 5.73 | Bearish |
Current Ratio | 1.04 | Bearish |
ROIC-WACC Ratio | Positive | Bullish |
Costco Wholesale Corporation Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 54.06 makes COST an expensive stock. By comparison, the P/E ratio for the S&P 500 Index is 28.69.
The average analyst price target for COST is $1,052.94. This suggests moderate upside potential with rising downside risks.
Costco Wholesale Corporation Technical Analysis
Today’s COST Signal
Costco Wholesale Corporation Price Chart
- The COST D1 chart shows price inside a horizontal resistance zone.
- It also shows price action between its ascending 0.0% and 38.2% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bullish with a negative divergence.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- COST outperformed the S&P 500 Index over the past few weeks, a bullish confirmation, but bearish catalysts are accumulating.
My COST Short Stock Trade
- COST Entry Level: Between $1,000.95 and $1,020.82
- COST Take Profit: Between $893.60 and $907.96
- COST Stop Loss: Between $1,052.94 and $1,074.00
- Risk/Reward Ratio: 2.07
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