Costco Wholesale Corporation (COST) is a big box retailer for members only. Costumers pay an annual fee in return for the opportunity to buy all sorts of goods, with many items available in bulk. You name it; they have it – from small snacks to appliances.

The stock closed Tuesday at $188.30, up 22.4% year to date and in bull market territory at 36.5% above its post-election low of $137.96 set on Nov. 9, 2016. The stock set its post-election high of $191.22 on Dec. 5.    

Analysts expect Costco to post earnings per share $1.34 to $1.35 when the company reports results after the closing bell on Dec. 14. Jefferies recently reiterated a Hold rating for Costco shares, even as the firm raised its price target to $186 from $162. But the stock is above even the increased price target, which in my judgment is a sell signal. Key metrics to focus on include membership renewals and new member numbers. With Amazon.com, Inc. (AMZN) adding new Prime members and featuring Whole Foods, there could be some membership defections from Costco. (See also: Costco Stock Breaks Out After Strong November Sales.)

The daily chart for Costco

Daily technical chart showing the performance of Costco Wholesale Corporation (COST) stockCourtesy of MetaStock Xenith

The daily chart for Costco shows a choppy pattern with several price gaps, which line up with prior earnings dates: March 2, May 25 and Oct. 5. More recent positive share price performance has been helped by a "golden cross" confirmed on Nov. 22, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead. The stock closed at $172.48 that day and is up 8.8% since then.

The weekly chart for Costco

Weekly technical chart showing the performance of Costco Wholesale Corporation (COST) stockCourtesy of MetaStock Xenith

The weekly chart for Costco is positive but overbought, with the stock above its five-week modified moving average of $176.58. The stock is well above its 200-week simple moving average at $142.80 and has been above this "reversion to the mean" since the week of Sept. 10, 2010, when the average was $53.82. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 90.93, up from 89.15 on Dec. 8. These readings are well above the overbought threshold of 80.00. 

Given these charts and analysis, my trading strategy is to buy weakness to my quarterly and annual value levels of $173.89 and $172.76, respectively, and to reduce holdings on strength to my weekly risky level of $187.89. My monthly and semiannual pivots (or magnets) are $176.70 and $180.15, respectively. (For more, see: Costco's Business Model Is Smarter Than You Think.)

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