DailyPlay – Costco Wholesale Corp (COST) – October 11th, 2021

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Market Outlook:

An eventful week for equities saw the major indices end the week in the green. SPY and QQQ have declined since early September and managed to find support in recent days to break above their respective 100 D MA’s. The major event last week was the jobs numbers which were significantly lower than expected. Analysts were expecting a 500k increase in jobs but the actual figure came out at 184k. While this figure does provide evidence of keeping interest rates at bay, SPY and QQQ declined on Friday. The bond selloff continued on Friday which saw yields rise providing some fuel for the Financial sector. Sector rotation indicates a broadening recovery with 7 sectors in the Improving and Leading categories and 4 in the Lagging and Weakening categories. Financials and Energy are providing leadership thanks to higher rates and surging oil prices.

COST Bearish Trade Idea:
Our bearish DailyPlay trade is Costco Wholesale Corp (COST). From a technical perspective, COST is losing momentum after a strong rally from March this year. The deceleration in weekly and daily momentum points to further downside. Price ran into resistance at $467 and formed a double top on the daily timeframe before continuing lower. COST is also trading at a relatively high valuation (40x PE) compared to its 5 year average of 33x Earnings. 

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