COST, Costco update and option trade.

cost june 19 2018

There can be little doubt that this 5th wave is a “diagonal”. And if it is a diagonal it must be a 5th wave. The high was a couple of working days ago and reached $207+. Diagonals invariable retrace back to their base level which should be in between the two horizontal lines. Typically this move should be swift which, in practice, means in about 1/3 of the time it took to go up, about 18 months, so in about 1/2 year. This $90 drop might sound like a lot but it would only take us back 2 years out of nine. Furthermore the p/e is running above 30. See chart below for the bigger picture;

cost 19 june 2018 b

In my opinion this situation would be played best by way of an option. As an example, a Sept. 2018 put with a strike of $200 sells for about $4. If you want to have more time on your side you can take it to Jan. 2019 where a similar $200 put would go for about $6. You will probable earn a multiple of your money back! with excellent odds as the complete lack of volatility in this stock, see the narrow channel, makes the put options dirt cheap.

COST, Cosco update

costcost dec 25 2012

Back in June, now six months ago,  we suggested stepping aside, getting out, selling or whatever on the simple basis that we did not expect the stock to go much beyond $95 (it was $93 at the time). We did mention the Mnt. Everest syndrome that somehow sucks stocks to about $100. This one went to $105.97, including overnight, $99.44 without. When we suggest selling we did so with the average investor in mind, one that is completely undisciplined. If all our readers were “professional” all the time the sell option would not exist, simple because you do not sell a stock that has momentum going for it, after all the sky is the limit! Instead you would ratchet up your stop-loss ( to the trend line) and let events dictate when it is sold. Personally, we would sell here if we had not done so back in June. With a p/e of 24 this one is rather rich relative to the market.

COST. Costco

cost june 2012 bcost june 2012

Costco is approaching the $100 level. It seems to be impervious to what happens in the macro economic world, or perhaps it is just well suited to thrive in that sort of a competitive environment. We are not sure how to label this in EW terms, but we are pretty sure that this stock is forming a wedge in a Mnt. Everest type of peak. It is doubtful that this stock will get much above $95 and since the next stop could be some $50 lower we would get off this train, plain and simple.