Costco price trading in a technical formation

Shares in Costco Wholesale Corporation (COST) have gone through a very turbulent year with the share price ranging from a high of $610 to a low of $405. The company’s earnings report for the fiscal quarter ending February 2023 is set to be released on Thursday, 2 March, after market close. The consensus EPS for Q1 is $3.21 compared to Q1 2022’s $2.92.

Costco generated just 2% of its revenue from membership fees, however, those $4.2 billion in membership fees accounted for most of its $7.8 billion in operating profits. This clever “formula” of generating revenue with a very high profit margin has helped the company get through a hard year.

On the technical side, the price has been trading in a descending triangle formation for the last 6 months. Currently, the price is facing resistance at a point on the chart where the 20-day simple moving average line and the 50% of the daily Fibonacci retracement level meet. Given that there will be no big surprise percentage on the EPS at the date of the release, the price most probably will continue to trade within the boundaries of the triangle formation in the short term. 

In the case of upward movement (supported also by the oversold levels on the Stochastic oscillator) we might see some resistance around the $520 price area, which consists of the upper band of the Bollinger bands and the 61.8% of the Fibonacci. 

In the case of a downward continuation, the first point of support would probably be found around the $490 area which is made up of the 50 and 100 moving averages, the lower band of Bollinger bands is also just below the 38.2% of the Fibonacci.