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Is This the Time to Buy Costco?

Costco Wholesale (COST) saw its share price plunge sharply in the past six weeks. Have prices reached a level or area where some farsighted investors see an opportunity? Let’s check. 

In this daily Japanese candlestick chart of COST, below, we can see a falling window (gap) and large red (bearish) candle before today’s spinning top pattern where bulls and bears are in close balance. A bullish or white candle on Friday could complete a bottom reversal pattern. Trading volume was very heavy Wednesday and could mark a “throw in the towel” event.
The 12-day price momentum study shows equal lows which is a bullish divergence when compared to prices making lower lows. The fast stochastic indicator is oversold but could soon cross to the upside. 
In this daily Point and Figure chart of COST, below, we can see that prices have reached a downside price target of $424. Reaching a price target is not a strong reason to be a buyer but when combined with other clues can improve your odds. 
 
Bottom line strategy: Regular readers of Real Money should know that I am not inclined to buy falling knives but this one time is intriguing. Aggressive traders could go long COST at current levels. Risk a new low close.

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