Costco Wholesale Corporation (NASDAQ:COST) steps into the earnings confessional tomorrow, with the discount retailer scheduled to report fiscal fourth-quarter financial results after the close. Ahead of the event, COST sports an intriguing technical setup worth exploring.
Looking back at the last eight quarters, COST’s post-earnings are a mixed bag, with four moves higher and four moves lower. There’s the muted 0.7% drop back in May, but the shares added 4.4% the day after the company’s December report. This time around, the options market is pricing in a 5.3% swing, regardless of direction, higher than the 3.2% move the shares averaged over the last two years.
On the charts, Costco stock has muscled higher in the last 12 months, with its 80- moving average keeping pullbacks in check along the way. The security boasts a 67.4% year-over-year gain, and is outperforming on a year-to-date basis too, most recently hitting an all-time high of $923.83 on Sept. 13. Keep an eye out for the bullish flag pattern forming during the recent consolidation below those record highs.
Diving into the options pits, bearish bets have been more popular than usual. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 1.10, which stands higher than 85% of reading from the past 12 months. Further out, COST’s 50-day put/call reading of 1.00 sits higher than 78% of annual readings.
Plus, Costco’s Schaeffer’s Volatility Scorecard (SVS) sits up at an elevated 74 (out of 100), hinting that the stock has had a tendency to exceed option traders’ volatility expectations during the past year.