Costco Wholesale Corporation COST 0.39% finally appears to have found some solid technical support after news that Amazon.com, Inc. AMZN 0.12% is buying Whole Foods Market, Inc. WFM 0.33%brought Costco’s recent run to an abrupt end.
Costco made new all-time highs above $182 earlier this month following a strong earnings report. However, fears that Amazon may soon target Costco’s market share sent the stock as low as $156.65 last Friday. So far this week, however, Costco has bounced back above $161, and Costco bulls have reason to believe that the $157 support level could hold.
Costco previously bounced off the $157 level back in March. Prior to that bounce, $157 served as resistance in both December and January.
Technical traders know that resistance levels transition to support levels once they are broken, which certainly seems to be the case for Costco and the $157 level up to this point. Ever since the stock broke above $157 in February, it hasn’t looked back.
In addition to past trading patterns, Costco’s 200-day simple moving average is also currently resting at around $157, providing additional psychological support for the stock.
If $157 continues to hold and Costco drifts higher, traders will be watching to see how it reacts to the $171 level. If the stock runs into resistance at $171 and fails to break out higher, it could be in danger of forming the dreaded head and shoulders technical pattern, an indication that Costco could be headed significantly lower than 157 in the months ahead.
Of course, any move above $171 would likely mean…
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