Costco Wholesale Corporation (COST) was slightly up in trading on Thursday ahead of its Q3 financial results, which are set to be released after the market closes.
When the big box retailer reported mixed Q2 results on March 2, the stock closed up almost 2% on the following day. That quarter, Costco reported better-than-expected earnings per share of $3.30 on revenues of $55.266 billion, beating the consensus estimate, which was $3.21 per share, but missing the revenue estimate, which was $55.54 billion.
Analysts estimate that for the third quarter, Costco will announce earnings of $3.29 per share on revenues of $54.57 billion. Morgan Stanley analyst Simeon Gutman’s rating for Costco remains Overweight, with the price target increasing from $520 to $535.
The stock’s trend could turn bullish or bearish, depending on the reaction it gets post-earnings. Costco is currently on a downtrend, but it may print a bullish reversal candlestick.
Trading stocks or options over an earnings report is considered gambling since the effect on the stock can be unpredictable. Stocks can react positively to an earnings loss or negatively to an earnings beat. Options traders, particularly those with close-dated calls or puts, face increased risk because institutions that write the options increase premiums to factor in implied volatility.
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Costco’s Chart and Trading Strategies: Costco has been trading in a massive falling channel pattern since August 18, 2022. Recently, it tested the upper trend line of the formation on May 12 but rejected the level. The stock is trading in a triangle pattern within the channel since March 3 and is now consolidating under the 50-day and 200-day simple moving averages.
- If Costco gets a bullish reaction to its earnings announcement and breaks through the channel and triangle, it could mean a big move to the upside is coming. Conversely, if the stock reacts negatively and breaks down from the triangle, it could test the bottom trend line of the channel.
- Costco is trading within the downtrend patterns and making a series of lower highs and lower lows. However, on Thursday, the stock was looking to form a hammer candlestick, which is bullish for Friday.
- Resistance levels for Costco are at $491.83 and $507.42, while support levels are at $477.50 and $459.59.
Photo via Pixabay.
