Like the markets at large, for the first part of the year Costco shares have enjoyed a strong rally off lows. Year to date the stock is higher by about 9%. Like many stocks, it's currently sitting right at its 200-day moving average. The difference between this name and many of the others is how it has behaved while near this threshold.
On February 19th, the stock pushed into the 200-day for the second time this year. Unlike the first time, however, it was able to poke through and not suffer much of a pullback. Instead, the stock pushed repeatedly at the highs, attempting to push comfortably over the 200-day moving average.
The interesting part is when you look at the lows from February 19th to now. Looking at all the lows, you quickly see how it's pulling back less and less. Having highs that are relatively equal and lows that are rising as they are suggests that investors are unwilling to sell, and those that are willing to sell are able to find buyers rather quickly.
For this reason, we'll be looking to play the potential break above that range. An entry at $219.85 allows one to participate in the breakout as it happens. The upside potential is well over $225. However, this trade has one big warning: earnings are due on March 7th and anything is possible. Trading between now and then shouldn't be an issue, but investors are highly cautioned to weigh your options ahead of earnings in case there's a large downside surprise.