Costco Inventory Skyrockets: What You Need to Know Now! | Don’t ignore this chart!

Costco (COST) stock price soared to unprecedented heights, hitting record highs. With less than a month to go before the company is scheduled to release its earnings books, judging by the price action, you’d think investors would be expecting an explosive report.

Costco outperforms the broader market and the staples sector.

Chart 1. Weekly cost chart. Note COST’s outstanding performance compared to technical rankings and several key benchmarks.Chart source: StockCharts.com. For educational purposes.

Costco’s SCTR score rose to 91, a number not seen since 2022 when it last hit a record high. This indicates that several technical indicators are flashing bullish signals supporting the “full sailing” position of the 50-week and 200-week simple moving averages. (SMA). Strong upward momentum? It certainly seems like that.

COST also significantly outperformed the broader market ($SPX) and its sector, Consumer Staples, over the long term, posting gains of 69% and 77% against their respective benchmarks. As a side note, COST is one of several large-cap stocks that showed up in the scan for new all-time highs on Thursday, on a day when the three major indexes barely moved.

But is there enough tailwind to maintain skyward momentum? One way to measure this is to add an indicator such as the Funds Flow Index (MFI)..

Plotting Money Flow Index in SharpCharts

To add an MFI:

• at your dashboard, click charts and tools In the top left navigation bar
• sharp chart It’s the top left selection. Enter your stock symbol there.
• In SharpCharts Workbench money flow index Check the indicators in the indicators menu.

What’s going on in Tailwind?

Chart 2. Daily cost chart. All show continued strength except for MFI, where buying pressure began to decline in December.Chart source: StockCharts.com. For educational purposes.

To summarize briefly: The Money Flow Index (MFI) is essentially a volume-weighted relative strength index (RSI). When prices rise, more funds flow in (buying pressure), and when prices fall, funds flow out (selling pressure). MFI is a momentum oscillator that uses volume and price movements to identify potential turning points and extreme price levels.

You can see COST rising steadily with some drops. Meanwhile, the 50-day, 100-day, and 200-day SMAs are fully extended, indicating a strong upward trend.

But in contrast, MFI is falling from its last “overbought” level in mid-December as prices continue to rise (see blue arrow). This difference indicates that prices are rising despite decreasing buying pressure. That said, a downtrend is expected and the most recent candlestick suggests that the market may be getting the message too.

However, it is too early to conclude that this is the beginning of a downward trend. Typically, Fibonacci retracement levels can help us gauge pullbacks and determine some good buy entry points, but since the pullback has not been confirmed, this is not possible yet.

So if you are optimistic about COST instead, Set price alert at $675, the low last move. (See blue horizontal line) A drop below this level is likely to result in further price declines. And here are a few potential entry points:

• A confirmed decline is a green light to use StockCharts’ Fib retracement tool, which can be used to identify entry points.
• Look at the 50-day or 100-day SMA for a potential bounce (especially if they join other market support levels). and/or
• Set a target for the next swing low at $640 (see red horizontal line) for a potential entry.

conclusion

‘Stock chart’ new all-time high The scan engine combined with SCTR rankings is a useful tool for identifying strong stocks to trade. Of course, “all-time high” can often mean “too high” or overbought. Among other things, metrics like MFI can help you understand whether there is enough momentum to support a stock’s current trajectory or whether it may be time for a downturn. Often, stocks that have reached all-time highs are due for a decline, and this is where we turn to technical tools to measure declines and identify potential entry points.

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.