Just a bit of history here. . .I spent 35 years in Seattle, the last 25 in a place called Kirkland. . .a suburb of Seattle and home of Costco. .which is why all their private label stuff is called "Kirkland". I'm actually member # 86000 so you can tell how old I am. I remember when the first store was opened. . .I was there. . .sorry, no pictures. Back then I was in the custom home building business and built homes for several of the Costco execs . . .believe me . .these guys know how to make money (and spend it).
OK . . .enough reminiscing.
This is a powerful bullish chart by anyone's standard and although buy and hold is the wise man's play, you know me, I prefer to trade it.
The RSI 2 settings for COST are (3,34,80,26,78). Still easily within a single standard deviation of our base model, but the interesting thing here is that the optimized RSI value is 3, not 2. . which is an indication that (this is a quiz)...................the stock tends to trend.
Contrary to our NEM study last week where the short side excelled, COST excels on the long side. . .again no doubt reflecting its overall bullish trend and its constant distant from the 200 WSMA (top most chart is weekly bars).
From trading standpoint, there aren't a lot of trades. 128 over 5 years equals 1 every 2 weeks, with the average length of trade 7 days for the winners and 15 for the losers. A couple stops, fixed and trailing, will knock the later number down substantially and also limit drawdown. Taking the long side only equals about 1 trade a month, holding for a week and then out.
The RSI study may also be a useful cycle indicator for option traders for buy/writes (.64 dividend) and calendars. Limited exchange participation here and although open interest is robust, the ATM spread tends to run .05-.10 on $2.50 strike increments, so not a daytraders fancy.
Probably best to focus on the long side of COST since, as with XLE, the short side is considerably more risky and less profitable. Still, the long/short equity curve contains no hiccups.