Chart of the Day: Investors Brace for Earnings from Costco
The stock has been a stellar performer but recent evidence of a slowdown in consumer spending is showing up on the chart.
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The last big retailer is set to report earnings on March 6 for the holiday quarter, and that is Costco COST. The stock has been an amazing performer for TheStreet Pro Portfolio over the years as the company continues to beat earnings handily each quarter, but this time around there are questions.
First, some other big-box retailers such as Walmart WMT and Target TGT, which we would put in the same category as Costco, expressed some concern over the Trump administration's policy with tariffs. Further, they are seeing a slowdown in consumer spending, which we also saw in the data last month with weaker consumer spending and a poor January retail sales figure.
It all adds up to worry for Costco even as the chart remains very strong. The candles have remained mostly blue over the past five weeks, indicating strong bullish trends in the GoNoGo composite of indicators. A mild pullback over the last couple of weeks has put Costco in a better position to "buy the dip," but we would suggest waiting until Thursday's earnings release before adding more shares.
Momentum is starting to slow down; the ADX (pane 3) is lower as that indicates the trend is slowing down. It does not mean bearish it simply means less interest in buying the stock at this time. Money flow is positive but is coming down and the MACD (moving average convergence/divergence is on a sell signal.
Costco is a favorite name of ours and is often seen as a strong consumer sentiment favorite. We'll see if they consider recent developments and data important to their future.
We rate Costco a Two in TheStreet Pro Portfolio, or "stockpile on pullbacks."
At the time of publication, TheStreet Pro Portfolio was long COST.
