Trader sees Costco headed to new highs on earnings

Shares of the big box retailer may have fallen more than 5% from the stock's Sept. 6 record high, but Gordon thinks the charts are signaling another big rally.

"[Costco has] pulled back to support and I think it's ready to head back to the highs heading into earnings," he said Wednesday onGordon is looking at a pullback for Costco that took the stock back to the $285 area, which he defines as support given that the level was an "old zone that was formerly resistance" during the summer.

But Gordon also says the consumer staples sector looks due for a bounce given a pullback to support in the $60.50 area. "We also are seeing falling bond yields in the U.S. again, which will put those dividend payers of the staples back in focus," he added. Given that implied volatility — the price of options — is elevated heading into earnings, Gordon plans to sell the Oct. 4 290-strikeand buy the Oct. 4 285-strike put for a credit of $1.98. This means that should Costco close above $290 on Oct. 4 expiration, then Gordon would make $198 on the trade. If Costco closes below $285 on expiration, then Gordon would lose about $302., given that Costco was trading at around $287 on Wednesday.

TradingNation so typical, one analyst one thing another another. cost is a long term fabulous hold, but indeed pricy right now. but then again, all good stocks are pricey and they are pricey for the reason that they are good.

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