COST will trigger a long-term swing short entry on a weekly close below this nearly 5 year uptrend line or at current levels for more aggressive traders as prices backtest the pattern from below following today’s quarterly earnings disappointment induced gap lower.  COST is currently backtesting the nearly 5 year bull market uptrend line after breaking solidly below on today’s opening gap lower.  COST did make an intra-week break below the uptrend line last month but manage to close the week back above the trendline in addition to failing to break below the 107 level (one of the previously suggested entry criteria from the original setup).  When trading breakouts on chart patterns, I typically prefer to wait for a candlestick close above (for longs) or below (for shorts) the trendline or pattern that I am following.  As this trade is based off a weekly chart, waiting for COST to print a weekly (end of day Friday) candlestick close below the uptrend line helps to minimize the chances of a fake-down (false breakdown or whipsaw sell signal).

The downside to that strategy lies in the fact that once prices break out of a well-defined trendline or price pattern, the stock tends to move quickly due to various factors such as large clusters of stop orders (buy & sell stops) that were placed above/below the resistance/support levels that were taken out as well as longs (or shorts) who were watching the pattern all piling into the trade, creating order imbalances (one of the reasons that many stocks “explode” higher or “implode” lower once a breakout occurs).  As waiting for weekly confirmation of a breakdown of a weekly chart pattern, especially one that comes early in the week or has a lot of built-up energy (such as a steep wedge, extreme overbought conditions, very low short-interest, etc..), might result in a less-than-favorable entry on the trade, aggressive traders might prefer to take a partial or even a full position as soon as prices break below the pattern (or in this case, here on the backtest following the breakdown earlier today).  A second lot could then be added just before the close on Friday if prices are poised to print a solid weekly close below the trendline.  The targets have been revised with a new first target (T1 at 104.53) and the previous target now T2 (95.10).  Previous & updated Costco weekly charts below: