COST trade ideas
86% probability trade on Costco (Ratio Spread)
After last earnings Costco had a 14% down move. If we take into consideration last year, we have a CVPOC at around $150 Price, and in the shorter term the VPOC is around $167 (2017). That means that those prices are the ones that have traded the most and considered fair for the stock.
With an IV Rank at 67 we can sell some premium, so given the down move I sold a 3:1 Ratio spread for $1.66.
This gives us a max profit of $665 at the $150 level and if it stays above $155 price we would be making $166 at expiration.
Our probabilities of profit are very high at 86%
The trade:
Sell (3) AUG18 155 PUT
Buy (1) AUG18 150 PUT
Buy This Costco (COST) Dip Before It Shoots UpCostco has been in an overexuberant decline since news of the Amazon and Whole Foods merger. Fortunately, this decline in the stock has brought it in-line with recent support levels and should begin to move upward once again. The stock has been in a consistent bullish trend since 2010. The recent decline seems to be part of the natural cycle for Costco. This cycle points upward next and also has other factors correlating to this move. On multiple occasions through the long bull trend, three of the technical indicators discussed below have been at similar levels in which they are now. These instances have resulted in gains for the stock. I have also conducted further analysis based on other historical information and readings that confirm a pending gain for Costco which are laid out below.
When we look at technical indicators, the relative strength index (RSI) is at 30.7171. RSI tends to determine trends, momentum, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is moving upward from recent oversold levels.
The positive vortex indicator (VI) is at 0.7644 and the negative is at 1.1780. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The positive and negative levels have been moving in a manner consistent with upward movement for the stock The stock and indicators had been bearish for the past three weeks, but that trend is starting to end.
The stochastic oscillator K value is 5.0897 and D value is 6.4898. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic well oversold and the stock should begin to move upward soon.
I have created an algorithm (called the SAG gauge) which signals when stocks are truly overbought and oversold. The algorithm indicates when a particular stock meets multiple criteria culminating in an oversold or overbought signal. That signal will occur within a few trading days after the stock has begun to move upward. Recognizing this movement and pending signal can increase gains by entering early.
Upon back-testing this indicator, it has signaled oversold status 25 times dating back to 1986. The stock always gains at least 0.75% over the following 35 trading days after the indicator date. Eighty percent of the time the stock gains at least 8.75% and seventy percent of the time gains 9%.
Since 1998, this stock always gains a minimum of 1.76% when the RSI, positive and negative VI are simultaneously at their current level and moving in their current direction. This additional study requires the stochastic at the bottom of the chart above to be oversold as it is today too. Ten similar instances were found. The median move is 15.20% over 20 trading days. The last two times the stock bounced off its support line (which it did on July 11), the stock has achieved a minimum gain of 8.30% over the following 22 trading days.
Three of the ten instances we just covered occurred at the same time or within days of an oversold signal on the SAG gauge. These instances resulted in a minimal gain of 6.10% and median of 16.25%.
Considering the RSI, VI, stochastic levels, SAG gauge and historical similarities, the stock should see upward movement over the short to intermediate time period. Based on historical movement compared to current levels and the SAG gauge, the stock could gain at least 6% over the next 35 trading days if not sooner.
$COST at 151 it could rebound from 149.92 $COST at 151 it could rebound from 149.92 or 45-degree at Gann's support
Here you are, COST cypherCOST is still under huge selling pressure after another downgrade by BMO on Monday, and as I wrote last week, I've waited quite a while for a good entry for the company.
Although I didn't really trade it,last week the BAT pattern failed as it gave such a small room for the stock to run.
While when the X @ 156.59 broke, it did give good short continuation to make it a great stop loss point.
And all of a sudden, here comes the cypher, a much better X point than the BAT last time.
This Cypher pattern suggest a 150.90 entry and a 141.99 out, about 6% risk. As it's being slumped so hard, I still won't just put my buy limit @ 150.90 to fight with the recent downtrend;
while if there is any potential reversal or retracement sign like hammer or inside day breakout formed here, I'm willing to give it a shot!
I do think that will be a very risky trade according to how the market slumped COST stock, while at least I think it worth the risk.
Bat Pattern on COST, and I'm always a big fan of this company.According to the chart, there is a Bat pattern on COST and it suggests a 159.63 (0.886XA); while the trade may already fail if you traded it perfectly right to give the out to 1cent below X(156.59).
I've waited for a while for an actionable set-up to long COST, and I believe it's coming soon.
In my opinion, COST is a kind of company that is both great for trading and investing.
In terms of mid-term to long-term investment, it's nonsense to put stop loss only 2% away, so if I were in the trade I prefer using at least 149.99 of even all the way back to 141.99.
While as the Bat trade actually failed, I may wait for another bullish set-up to get involved with the stock.
Most important of all, this downside move since the AMZN-WFM deal had nothing to do with COST's fundamental, which is kind of a systematic risk event on all the retailers and wholesalers.
COST remain strong despite on-line shopping being a huge trend all these years; I don't really think when the on-line shopping giant acquire a huge physical retailer will hurt the business too much more, or at least not that fast yet.
On-line shopping is no doubt the future, while the expression is true for all these years.
I don't think AMZN-WFM deal will do much harm to COST's business, at least not that fast, so the pullback is a huge overreaction and it creates recent buying opportunity for COST.
Long $COST on overreaction Long Costco on market overreaction to 170 and I'll leave some on and aim for 180.
COSTCO WEEKLY REVIEWLarge knee-jerk selloff + July 4th weekend coming up + historical precedence = good entry opportunity
TRADE IDEA: COST JULY 21ST 155/158/175/178 IRON CONDORAfter news of AMZN's acquisition of WFM, COST's implied volatility has popped here, with its implied volatility rank ramping up to the 67th percentile over the preceding 52-week period, and with background implied volatility at 21%, making a premium selling play potentially worthwhile.
Metrics:
Probability of Profit: 64%
Max Profit: $93/contract
Max Loss/Buying Power Effect: $207/contract
Break Evens: 157.07/175.93
Theta: 1.96
Delta: -2.47
As an undefined risk alternative, the July 21st 150/175 short strangle is going for 2.35 at the mid with a probability of profit of 71%, BE's at 155.65/177.35, theta 8.85, delta -3.91.
Notes: Because I could potentially see this snapping back to the upside, you may want to skew the setup to the call side, narrow the call side spread to reduce call side risk, or otherwise put on a limited upside risk play (e.g., July 21st 160/173/175 Jade Lizard, 1.95 credit at the mid, BE's at 158.05/174.95). With the Jade Lizard, upside risk is limited to .05 (the width of the call side spread (2.00) minus the credit received (1.95) ... .
$COST 171.6 possible V from here, support 169.7, stop 163$COST 171.6 possible V from here, support 169.7, stop 163
Bullish On Costco, But Earnings FirstOn May 17, Costco bounced off of its reoccurring support level. This has been solid support since August 2015. Costco also has earnings in focus this week. The estimated EPS is nearly where it was during the previous quarter's EPS which was a massive miss. A similar massive miss this time around will yield the analysis contained herein almost worthless. However, positive earnings and forecasts should easily meet the projection in this article.
When we take a look at other technical indicators, the relative strength index (RSI) is at 47.4805. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is relatively neutral and it could go any direction.
The true strength index (TSI) is currently 11.2060. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the stock has been moving down for the past two weeks.
The positive vortex indicator (VI) is at 0.9097 and the negative is at 0.9696. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. Currently the negative and positive indicators are moving closer together, with the positive moving up. With continued upward movement of this indicator the stock will go with it.
The stochastic oscillator K value is 16.3099 and D value is 9.6028. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic is currently oversold and should move up soon.
Considering the RSI, TSI, VI and stochastic levels, the overall direction favors a move to the upside. Based on historical movement compared to current levels and the current position, the stock could gain at least 3.33% over the next 19 trading days if not sooner. The major hurdle for this movement will be from the earnings released this week.
