Costco (COST) inventory has soared into uncharted heights, leaving its final all-time document within the mud. With just a little below a month earlier than the corporate is scheduled to open its earnings e book, you’d suppose buyers predict one thing of a blowout report, judging from the worth motion.

Costco Outperforming the Broader Market and the Staples Sector

CHART 1. WEEKLY CHART OF COST. Be aware COST’s robust outperformance in technical rating and relative to a couple key benchmarks.Chart supply: StockCharts.com. For academic functions.

Costco’s SCTR rating crept as much as 91, which it hasn’t seen since 2022, when it final broke record-high territory. This means that a number of technical indicators are flashing a bullish sign, supported by the “full sail” place of its 50-week and 200-week easy shifting common (SMA). Robust bullish momentum? It certain seems so.

Plus, COST, on a longer-term scale, has outperformed the broader market ($SPX) and its sector, Client Staples, fairly handsomely, clocking in a 69% and 77% achieve over these respective benchmarks. As an apart, COST is among the many a number of giant cap shares that got here up on Thursday’s New All-Time Highs scan, on a day when the large three indices barely budged.

However is there ample tailwind to keep up its skybound momentum? One technique to gauge that is so as to add an indicator, such because the Cash Movement Index (MFI).

Plotting the Cash Movement Index on SharpCharts

So as to add the MFI:

• From Your Dashboard, click on on Charts & Instruments on the high left navigation bar;
• SharpCharts is the highest left choice; enter your ticker image there;
• Within the SharpCharts Workbench, choose the Cash Movement Index from the Indicators menu to view the indicator.

What’s Occurring to the Tailwinds?

CHART 2. DAILY CHART OF COST. Be aware that every one factors to continued bullishness aside from the MFI, which began exhibiting a decline in shopping for strain in December.Chart supply: StockCharts.com. For academic functions.

A fast recap: The Cash Movement Index (MFI) is actually a volume-weighted Relative Power Index (RSI). When costs go up, more cash flows in (shopping for strain), and when costs go down, cash flows out (promoting strain). The MFI is a momentum oscillator that makes use of quantity and value actions to identify potential turning factors and excessive value ranges.

You possibly can see COST rising steadily with a slight pullback. In the meantime, the 50-day, 100-day, and 200-day SMAs are totally prolonged, indicating a powerful uptrend.

In distinction, nonetheless, the MFI is declining (see blue arrow) from its final “overbought” degree in mid-December, as value continued to rise. This divergence signifies that costs are going up, regardless of shopping for strain declining. Briefly, a pullback is due, and the newest candle hints that the market can also be getting the message.

Nonetheless, it is too early to verify that that is the beginning of a pullback. Sometimes, Fibonacci retracement ranges can be useful in measuring the pullback and figuring out a number of good lengthy entry factors, however this is not attainable simply but, because the pullback hasn’t been confirmed.

So as an alternative, when you’re bullish on COST, set a value alert at $675, its final swing low (see blue horizontal line).  A break beneath this degree would seemingly imply costs are heading additional down. And from there, you will have a number of potential entry factors:

• A pullback confirmed can be the inexperienced gentle to make use of StockCharts’ Fib retracement device, which can be utilized to establish an entry level;
• Have a look at the 50-day or 100-day SMAs for a possible bounce (particularly if any enter confluence with different market help ranges); and/or
• Set your sights at $640 (see pink horizontal line), the subsequent swing low, for a possible entry.

The Backside Line

The StockCharts’ New All-Time Excessive scan engine, coupled with the SCTR rating, is a priceless device for figuring out robust shares to commerce. In fact, “all-time excessive” can usually imply “too excessive” or overbought. Indicators just like the MFI, amongst others, might help you perceive whether or not there’s sufficient momentum to help the inventory’s present trajectory or if it is due for a pullback. Oftentimes, shares hitting a document excessive are due for a pullback, and that is the place you choose the technical instruments to measure the pullback and establish potential entry factors.

Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your personal private and monetary scenario, or with out consulting a monetary skilled.