Trading Strategies For Costco Stock Before And After Q3 Earnings

Costco Wholesale Corporation COST was trading slightly higher Thursday heading into its third-quarter financial results, which are set to print after the market close. 

When the membership-only, big box retailer printed mixed second-quarter results on March 2, the stock closed almost 2% higher the following day.

For that quarter, Costco reported earnings per share of $3.30 on revenues of $55.266 billion, which beat the the consensus estimate of $3.21 per share and missed the $55.54-billion revenue estimate.

For the third quarter, analysts estimate Costco will report earnings of $3.29 per share on revenues of $54.57 billion.

Heading into the event, Morgan Stanley analyst Simeon Gutman maintained an Overweight rating on Costco and upped the price target from $520 to $535.

The reaction Costco receives post-earnings is likely to be the deciding factor on whether the stock will trade in a bullish or bearish pattern for the time being, because Costco is trading in a downtrend but could be printing a bullish reversal candlestick.

Of course, holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.

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The Costco Chart: Costco has been trading in a massive falling channel pattern since Aug. 18, 2022, most recently testing the upper trend line of the formation on May 12 and rejecting the level. The stock also started to trade in a triangle pattern within the channel on March 3 and has been consolidating recently under the 50-day and 200-day simple moving averages.

• If Costco receives a bullish reaction to its earnings print and breaks up through the channel and triangle, a big move to the upside could be on the horizon. If the stock suffers a negative reaction and breaks down from the triangle, the stock could test the bottom trend line of the channel.
• Costco is trading in a downtrend within the patterns, making a series of lower highs and lower lows. On Thursday, however, the stock was looking to form a hammer candlestick, which leans bullish for Friday.
• Costco has resistance above at $491.83 and $507.42 and support below at $477.50 and $459.59.

Read Next: Costco Likely To Report Higher Q3 Earnings; Here's A Look At Recent Price Target Changes By The Most Accurate Analysts

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