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Asset Watch
Thursday, October 13 2022
Admittedly, the wholesale giant confronts a conflicting technical backdrop. Supporting the bulls, Costco has hovered near its September 2021 high ($470.49) for thirteen straight days and closed above the key support level on Oct. 11. Likewise, its rising support line drawn from the December 2018 lows provides backup near $460.
In contrast, Costco has formed a bearish head & shoulders pattern. The left and right arcs are the shoulders, while the highest arc in the middle is the head. A breakdown below the neckline ($470) implies a significant downside since the distance between the neck and the head’s peak is more than $140.
However, if Costco can hold the line and invalidate the pattern, improved investor sentiment could ignite further upside. Additionally, with consumer staples often outperforming the S&P 500 during volatile periods, Costco’s defensive characteristics should make the retailer a relative winner in the short term.
So will support hold or is an epic drawdown on the horizon?
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