Costco Stocks Rise Due to February Dividends

Costco Stocks Rise Due to February Dividends
February 6, 2015

COST (Costco Wholesale Corporation) was on a tear upwards recently as prices pierced the $150 level for the first time and buyers jumped on for the ride.

The spike higher was partly due to fundamental news, internal news, as the company announced recently a substantial debt offering and the proceeds to be used for paying dividends on the 25th of February 2015. However, there’s a catch. In order for one to qualify for dividend payment, you need to be registered as shareholder by the 9th of February 2015. This opens a window of opportunity for speculative trading.

The above suggests that the recent spike was actually news driven and after the 9th February, which comes next Monday, the path of least resistance would be that the stock is going to be dumped as the registration date is passing.

Looking at the technical picture, it can be seen that COST formed a contracting triangle before the break higher, and that triangle has specific characteristics, in the sense that it is an irregular one (wave a smaller than wave b), suggesting limiting price action to follow.

These kind of triangles are appearing in zigzags as b waves or impulsive moves as 4th waves, and in both cases the spike higher should be discounted after the measured move (the thrust of the triangle is completed).

Well, the thrust of the triangle indeed is completed with the move above the $150 level and the idea is that price should retrace now all the way into triangle’s apex, hence, lower values should be expected.

Therefore, put options are the name of the game here but starting with the close of the trading day on the 9th of February and having end of week expiration date (next Friday, on the 13th of February, when the US equity markets close).

You can trade stocks at any of our reviewed Binary Options brokers. You can find out more here.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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