(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Shares of Costco Wholesale Corp. (COST) could be getting ready for a significant rise, with the stock sitting at a critical technical level. Shares of the wholesale club, could be set to climb to all-time highs, taking the stock price to levels approaching $190 based on using technical analysis. But for that to happen, the stock will need to clear a critical technical resistance level at $170.

Shares of Costco had a sharp decline in the middle of June following the announcement that Amazon.com (AMZN) would be buying Whole Foods. Costco's stock fell from roughly $184 to $151, a decline of nearly 18%. But despite the steep decline, the stock price quickly found a technical support level and has been able to test that support level at $151 on two occasions. 

Key Resistance Level

 

 

 

The chart above illustrates the strength of the support level at $151 in late July, and then managed to retest that same level at the end of August. It has given shares a solid base to build off, helping shares to climb higher back to roughly $169, within striking distance of making a significant technical breakout threshold, should the price rise above $170. The $170 level has served as resistance in the past dating back to May of 2016, and likely to be a hurdle this time around as well. But a move above $170 would serve as confirmation of the breakout and would likely help to propel shares higher. 

Longer-Term Trends

 

 

 

The longer-term charts show how Costco shares were entrenched in a multi-year trading channel, with shares deviating on only a few occasions. Should the stock cross resistance at $170, then shares would re-enter that channel and would help to ultimately lift the stock price back to its old highs, and likely on to levels around $190. 

Gap Needs to Be Filled

 

 

 

The chart above also shows a gap that needs to be refilled as well, circled in blue. That gap was created on the day that Amazon announced it was buying Whole Foods. For the gap to be filled entirely, shares of the stock would need to rise to levels back to $180. At which time the stock can resume with its previous uptrend in the trading channel. 

Shares of Costco have had a tough time in recent months, but the technicals are suggesting a rise could be in the future, with just one hurdle left to clear. 

 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

 

 

 

 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.