Costco Wholesale Corporation (COST) shares rose more than 3% on Thursday morning after the company's November sales exceeded expectations. In a recent news release, Costco reported that net sales jumped 13.2% to $11.26 billion in November, with a 10.8% increase in comparable-store sales. Some of the strong performance was due to gasoline prices and currency swings, but even excluding these factors, comp sales rose nearly 8%.

Stifel Nicolaus analysts responded by raising their price target on Costco to $185.00, citing the strong comparable sales growth after Whole Foods' new pricing strategy. Many analysts and investors had been concerned that, Inc.'s (AMZN) move into the grocery industry would cause a price war that hurt margins and market share. However, positive financial results from many grocers have helped alleviate these fears over the past few days. (For more, check out: Kroger Stock Breaks Out From 200-Day Moving Average.)

Technical chart showing the performance of Costco Wholesale Corporation (COST) stock

From a technical standpoint, the stock broke out from upper trendline and R2 resistance at around $173.49 earlier this week before extending its rally on Thursday. The relative strength index (RSI) moved to significantly overbought levels at 80.60, but the moving average convergence divergence (MACD) extended its move into bullish territory. Traders should maintain a bullish outlook on the stock given these factors.

Traders should watch for some consolidation above trendline support at around $175.00 over the coming sessions, especially because the RSI is firmly in overbought territory. If the stock breaks down below these support levels, traders should watch for a move to retest R1 support levels at $167.05 or the 50-day moving average at $164.83, but the strong fundamental performance makes this a less likely occurrence. (See also: Costco Could Break to New Highs.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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