Getting Paid to Wait for a Better Entry Price on Costco
Discount retailer Costco (COST) rallied nicely since hitting a low of $262.68 in late February. The stock hit a recent high of $388.07 and has been consolidating over the last few weeks. The rally from June through October put the stock in overbought territory based on both the 10-week RSI and the weekly stochastic indicators.
While I wouldn’t mind owning Costco, I think it is more prudent for investors to wait for a better entry point.
Something that jumped out at me is the trend channel that has formed over the last two years and how the stock is bumping up against the upper rail of the channel at this time.
With the stock hitting the upper rail of the channel and being in overbought territory, some investors might consider shorting Costco. Personally I wouldn’t recommend that because the company’s fundamentals are too good for me to consider a bearish position. Plus the stock could consolidate for a few months. A consolidation would move the stock out of overbought territory and if it last long enough it would give the lower rail time to catch up and provide support.
If we look at Tickeron’s Fundamental Screener, Costco gets a great score in the Profit vs. Risk Rating, a good score in the Price Growth Rating, and average scores in the SMR and P/E Growth ratings. The company does get three negative scores as well, but if we look at those areas, they are based on the timing and the stock price. The Outlook Rating is poor, and so is the Valuation Rating. The company also gets a negative mark for its Seasonality Score.
Another way to play the current setup on Costco would be to sell out of the money puts. Like I said, I would like to own the stock, but not at the current price. Because of the fundamentals, I don’t like the risk/reward relationship of shorting the stock. If the stock does fall down to the $330 area, it would mean a drop of 11.9% and a gain of that much on a short sell. However, if the stock continues to rise and hug that upper rail, the short position starts losing money.
If we look at the March ’21 330-strike puts, they are selling at $4.30 right now, or $430 for each contract. To sell the puts, investors would have to put up $3,730 in margin. If the stock drops below $330 and the stock gets put to you, your cost basis for owning Costco is $325.70. That’s down near the lower rail and where you want to enter a new position on Costco in my estimation.
If Costco continues higher or only drops a little, you keep the $430 and you earn a return on margin of 11.5%, a similar return as the short sell, but with less risk.
I like the idea of making money while waiting for a better entry price, especially on a stock that looks as strong as Costco.
Here’s what the complete outlook from Tickeron looks like.
COST's RSI Indicator recovers from oversold territory
The RSI Oscillator for COST moved out of oversold territory on October 07, 2025. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 23 similar instances when the indicator left oversold territory. In of the 23 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 10, 2025. You may want to consider a long position or call options on COST as a result. In of 72 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for COST just turned positive on October 09, 2025. Looking at past instances where COST's MACD turned positive, the stock continued to rise in of 41 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where COST advanced for three days, in of 373 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 59 cases where COST's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
COST moved below its 50-day moving average on October 16, 2025 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for COST crossed bearishly below the 50-day moving average on September 23, 2025. This indicates that the trend has shifted lower and could be considered a sell signal. In of 16 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where COST declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
COST broke above its upper Bollinger Band on October 15, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for COST entered a downward trend on October 08, 2025. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 60, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. COST’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (14.347) is normal, around the industry mean (7.751). P/E Ratio (51.877) is within average values for comparable stocks, (31.331). COST's Projected Growth (PEG Ratio) (5.906) is very high in comparison to the industry average of (2.506). Dividend Yield (0.005) settles around the average of (0.030) among similar stocks. P/S Ratio (1.527) is also within normal values, averaging (1.451).
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
a company which sells goods through membership warehouses
Industry DiscountStores
Advertisement