Costco Pullback Makes It Time To Buy In Bulk

 

On a day when most stocks were moving higher, shares of  Costco Wholesale (NYSE: COST) were among the few headed in the opposite direction as last week ended.

Is this the chance traders looking to pick up shares of the warehouse retailer have been looking for?

COST finished lower for a third day in a row on Friday. And in selling off by more than 1% in Friday�s session, the stock is back in technically oversold territory for the first time in weeks. Oversold conditions have helped COST become one of the highest rated stocks in the S&P 500 ahead of Monday�s open.

Shares of COST have been trading inbull market territory on a consistent basis since mid-August, and rallied to a 52-week high at the beginning of the week. In this context, it is likely that the selling in the stock over the past few days consists largely of profit-taking. From COST�s last oversold close in late November to its recent 52-week high on Tuesday, shares of COST had gained more than 8%.

So some profit-taking after such a run should be expected. And if COST continues to decline, becoming more overbought and earning additional ratings upgrades, then traders should also expect buyers to begin moving back into the market for the stock. In addition to trading in oversold territory, COST finished at 7-day closing lows, another aspect of the stock�s current pullback that short term traders looking to buy weakness may find attractive.

If COST�s last multi-day pullback is any indication of what trader may have in store, then the stock�s recent upgrade could prove well-deserved. COST sold-off for four days in a row in November, the final session in oversold territory, before rallying by more than 2% over the next five days.

Other retailers in this space were making significant gains on Friday, as suggested above.  Whole Foods Market Inc. (NYSE: WFM) was up more than 3% after a two-day pullback. And both  Kroger Company (NYSE: KR) and Safeway Inc. (NYSE: SWY) finished up by well over 1% and more than 2%, respectively.   Walmart Stores (NYSE: WMT) and  Target Corporation (NYSE: TGT), by comparison, were little changed on the final trading day of the week.