207.06 -17.78 (-8.59%) Sell

COST is a falling knife, continues to bleed every investor trying to catch it

13 min read

COSTCO WHOLESALE CORP delivered massive losses on Friday. It delivered -8.59% to close at 207.06. It is currently trading -15% below it's 52 week high of 244.21.

[Themes containing COST]

COST is currently in a bearish trend. The previous short signal in COST has not been profitable for investors in general. If you are short on COST at current levels please make sure that your allocation is limited and that your portfolio is well diversified.


COST has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 9 Oct, 2017 to 6 Dec, 2018. Over the last 2 years 11 months and 10 days, COST outperformed the SP500 index on 52% days.

During the last three months COST delivered profits on 53% days. However, it still managed to end this period in a loss. It's best return during this period (of +3.29%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -8.59%) was on Friday, 14 Dec, 2018. The longest stort-term trend during this period was 8 profitable days, which started on 29 Oct, 2018 and went on till 7 Nov, 2018. This bullish trend returned +9.75% to investors.

The last 12 months saw COST's investors making profits in 8 months and incurring losses in 4 months. During the last year, COST and SP500 index had the same number of profitable months. COST was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -10.47% compared to -7.28% returned by SP500 index in Oct 2018. COST and SP500 index, both had periods of 6 consecutive profitable months. It is interesting to note that both COST and SP500 index significantly outperform during months when quarterly/annual results are announced.

One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.
-- William A. Feather

COST is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in COST's volatility from 26 Sep, 2018 to 14 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that COST has significant positive skewness in it's return distribution. This indicates that investors can expect COST to recover from drawdowns quickly. Which makes COST a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in COST derivatives at this moment can consider 'Calendar Spread' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than COST. Therefore, SP500 must receive a lower allocation than COST in your portfolio. COST usually has shorter drawdown period than the SP500 index.

Based on your interest in COST you may find it interesting to know that V, UNH and AMZN are large caps that have all shown remarkable performance and qualify to be on every investor's watchlist.

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