COST Stock Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. Costco, COST stock, is in focus today…

This journal entry looks at the recent market movements of Costco. NYSE: COST

VantagePoint Trading Journal COST Stock

The major stock indexes have now rallied for five consecutive sessions since falling into correction territory last week.  They are now on pace for their biggest weekly percentage rise since November 2016.  Do the bulls have the market by the horns? Perhaps.

Thanks to the tools we have with VantagePoint, we can let the software do the forecasting and we can avoid the guess work. We can use the artificial intelligence forecasting software to analyze markets at all levels. Whether you are looking for individual stocks, futures or ETFs, stock sector rotations, or broad indexes like the S&P, Dow, and the Russell, VantagePoint can easily compile that data. Let’s focus our attention on Costco (NASDAQ: COST).  Here’s the VantagePoint chart:

image of COST stock trading diary with VantagePoint
VantagePoint recently indicated a potential upside breakout in COST could be forming due to a bullish crossover on 2/14/18.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black, simple 10-day moving average on 2/14/18. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position a full two trading days before back on 2/12/18. This indicator measures strength and weakness for a 48-hour period.  The move to the GREEN position indicates strength and further makes the case for a potential bullish scenario. That’s why one could consider entertaining a setup to the upside.

Strategy Discussion

If one were a straight stock trader, simply buying COST stock in the $191.25 area could prove wise. You are anticipating a move to the upside. It’s also a conservative way to enter COST without the limitation of time associated with other strategies. It would also be good practice to place a sell-stop order in the $183.00 area to mitigate potential losses.

For more active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation. The first thing that you want to determine is your target price. You need three pieces of information to complete this calculation. That would be the current price, expiration date, and at-the-money volatility for that timeframe. This calculation yields a target price of approximately $199.50. One could consider the potential opportunity of the March 2nd weekly expiration 195/200 call vertical paying $1.15. This has a maximum risk of what you paid for the spread, or $1.15. The maximum reward is the width of the spread less any premium paid or $5.00 – $1.15 = $3.85.  This gives us a reward to risk ratio of 3.35:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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