NEW YORK – Shares of Costco Wholesale Corp (COST) finished Thursday’s session with a modest gain, but the day’s trading pattern tells a story of lost momentum that could spell trouble for the stock at the start of next week.
Costco stock closed at
2.23 (0.23%). While technically a positive day, the price action reveals a significant struggle between buyers and sellers where the sellers ultimately gained the upper hand into the close.
The trading day was a tale of two distinct halves. After opening at
993.14** in the early afternoon. At this point, bulls were firmly in control. However, the momentum reversed sharply. For the remainder of the session, the stock bled its gains, selling off nearly eight dollars from its peak before settling at $985.14.
Analysis for Monday’s Open:
The outlook for Monday appears cautious to bearish based on this intraday reversal. Here’s why:
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Fading from the Highs: The inability to hold onto the peak price is a significant sign of weakness. When a stock rallies strongly only to give back most of its gains, it indicates that selling pressure overwhelmed the buying interest at those higher levels. This often points to exhaustion among buyers.
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Weak Close: Unlike a stock that closes near its high, Costco closed much closer to its opening price than its peak. This suggests that the negative momentum from the afternoon sell-off is what will carry into the next trading day, not the positive momentum from the morning.
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Key Levels: The stock was rejected at the $993 level. This price will now act as a significant resistance point. On the downside, the previous close around $982.91 and the day’s low of $980.30 will be important support levels to watch.
Despite closing in the green, the prevailing momentum for Costco at the end of the day was negative. The after-hours gain to $986.04 was minimal and does little to offset the bearish signal of the afternoon fade. Therefore, investors should be prepared for the possibility that Costco stock will face downward pressure or trade sideways on Monday. The stock is more likely to test its lower support levels before it attempts another run at the day’s highs.
