COST finds support at 50-day moving average
Costco Wholesale Corporation (COST) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
COST finished the week 1.08% higher at 302.43 after edging higher $0.46 (0.15%) today, slightly underperforming the Nasdaq 100 (0.38%) ahead of tomorrow's Memorial Day market holiday. Trading up to $1.14 lower after the open, Costco Wholesale managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the previous day's range, prices failed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (COST as at May 22, 2020):
Friday's trading range has been $3.07 (1.02%), that's far below the last trading month's daily average range of $5.41. Weekly volatility is also lower, being slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently lower than usual for COST.
After moving lower in the previous session, the stock managed to close higher but below the prior day's open, forming a bullish Harami Candle. Additionally, one bullish candlestick pattern matches today's price action, the Bullish Spinning Top.
After trading as low as 300.87 during the day, the share found support at the 50-day moving average at 301.49. Unable to break through the key technical resistance level at 303.25 (R1), the market closed below it after spiking up to 303.94 earlier during the day. The failure to close above the resistance could increase that levels importance going forward. When prices bounced off a significant resistance level the last time on May 11th, COST lost -1.77% on the following trading day. After having been unable to move lower than 301.25 in the previous session, COST found buyers again around the same price level today at 300.87.
Although Costco Wholesale is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Buying could speed up should prices move above the close-by swing high at 309.02 where further buy stops might get triggered. As prices are trading close to May's high at 311.83, upside momentum could accelerate should the stock mark new highs for the month.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bullish Harami Candle" stand out. Its common bullish interpretation has been confirmed for Costco Wholesale. Out of 49 times, COST closed higher 65.31% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 59.18% with an average market move of 0.62%.