Market Analysis: Costco Still Has Upward Momentum

Christopher Romano

Reuters, November 6 - Since late September, Costco's share price has soared by about 20%, and technical analysis indicates that there may still be plenty of momentum for this rally to continue.

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Click here to view the detailed technical analysis chart. (link)

Technical analysts closely examine historical price data charts to predict future movements of stocks. When a stock such as Costco (COST.O) rises, chart analysts often use a method called the "Fibonacci projection." This technical analysis tool calculates potential price targets based on the percentage of a stock's recent gains.

In Costco's case, an important Fibonacci projected price target sits just below $1,100.

Once a chart has identified a price target, analysts look for other reasons to explain why a particular level may be significant. In this case, $1,100 is a key round number—market participants often refer to it as a "psychological level" because share prices tend to gravitate toward that level. Such levels are also called "resistance," meaning a price that limits further advances in a stock.

Resistance levels are essential in determining the upside trend of a stock, and analysts monitor these levels to identify profit-taking points.

According to LSEG data, the $1,100 level is also significant because it roughly coincides with the all-time high of $1,096.50 Costco set in May of this year.

Further Fibonacci projected price targets include $1,152, followed by $1,238.

Once technical analysts expect a share price to rise, they look for more reasons to support—or challenge—that view. Volatility and momentum indicators are often used for this purpose.

One such tool is the Bollinger Bands, which assess volatility by measuring how much a stock deviates from its moving average.

Another tool is the Relative Strength Index (RSI), which uses the speed and magnitude of price changes to gauge momentum. The Moving Average Convergence Divergence Indicator (MACD) is another widely used measure; MACD uses moving averages to determine whether momentum is strengthening or weakening.

Currently, all three tools show that Costco's share price may continue to rise.

However, market trends can always reverse, abruptly ending the rally. If Costco falls below the $1,012 to $1,014 range, this bullish pattern will likely be negated.

Costco did not respond to a request for comment via its media relations platform.

Chart highlights:

• Since late September, Costco's share price has risen about 20%

• Fibonacci projections suggest the price could rise to near $1,100, and then potentially further to $1,152 and $1,238

• However, a drop below the $1,012 to $1,014 range would undermine the bullish outlook

("Chart of the Day" is a daily column written by Reuters reporters. This commentary is based on technical analysis of financial charts, which helps assess possible future price trends but does not guarantee results. This column does not constitute investment advice or trading recommendations. )

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