How A Value Play Like Costco Stock Became A Swing Trade

Since the IBD Methodology is clearly in the growth strategy camp, why is it that value plays have started appearing on our SwingTrader product? We go where the strength is. Even though Costco stock had a long bout of underperformance, here’s why it caught our attention.

				    ↑
					X

This video file cannot be played.(Error Code: 102630)

								Stock Market 2026: Managing Risk With A New Year
							

							

								See All Videos
							

						

					
					
						NOW PLAYING
						Stock Market 2026: Managing Risk With A New Year

Costco Stock Forms Saucer

Costco Wholesale (COST) had a nice run in 2024. While its earnings and revenue growth numbers are low (as is typical of large retailers) they are remarkably stable. Costco currently sports an IBD Earnings Stability Rating of 1 (the rating goes from 1 to 99 with 1 being the most stable).

But for the last year, the stock hasn’t really gone anywhere. The last quarter of 2025, Costco spent nearly all its time beneath both its 50-day line and long-term 200-day line. But that changed at the start of 2026.

First, Costco cleared its 50-day line (1), then its 200-day line a week later (2). Being above these lines are a minimum standard for our swing trades. The problem? Once it regained those averages it also meant that Costco was already 10% off its bottom with no clear entry or, more importantly, clear exit. So we let the stock continue without us.

It ended up completing a saucer pattern (3) with just a 21% depth. As it formed its handle with just a 6% correction, it showed an upside reversal at its 200-day line (4). That made things more interesting. Now we at least had the low of the upside reversal as a clear exit.

That allowed us to put Costco on the Current Trades list for SwingTrader the next day (5).

Managing Risk Within A Choppy Environment

Because the market has been so choppy the last few months, we’ve scaled back our position sizes and stuck with less volatile stocks. The look of the chart clearly put Costco in that category and a 21-day Average True Range of just 2% confirms it with numbers. Still, we started the position at just a quarter size as we’ve been doing with all individual stock positions. Since we got progress quickly, we added another quarter position the next day (6).

Nancy Tengler Shares How She Is Leaning Into A Value Strategy

While we would love to give our positions some extra time for gains, our holding period has been measured in days instead of weeks lately. When Costco started showing potential resistance at 1000, we started locking in some profit (7).

When Costco took a harder hit the next day (8), the early trim helped us escape the trade with a gain. You can’t force the market to give you the gains you want. Sometimes you just have to accept what little it will give.

Multiple Trades For A Stock

As has often been the case, sometimes we exit a stock and turn right around and put it on again. After getting support near its 21-day line, Costco got another shot in the SwingTrader model portfolio on Thursday (9). Again we started it as a quarter position with an added position the next day (10) as it crossed 1000. While we would love to let this one “bake” a little longer this time, we will have to let the market decide.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.

YOU MAY ALSO LIKE:

Go Broad And Go Abroad! This Portfolio Manager Sees A Change In Landscape.

Why This IBD Tool Simplifies The Search For Top Stocks

Using ETFs In Your Swing Trading Strategy

Looking For The Next Stock Market Winner? Start With These 3 Steps