Costco Surges 2.8% on Retail Sector Optimism: What’s Fueling the Rally?

Summary
• Costco (COST) surges 2.79% intraday to $970.00, hitting a 52-week high of $970.55
• Turnover jumps 0.39% as options volume spikes in August 15 expiration contracts
• Discount Stores sector gains 3.60% vs. S&P 500’s 0.78%
• Walmart (WMT) leads sector with 4.05% rally, while Dollar Tree (DLTR) gains 0.80%

Costco’s sharp intraday rally has ignited speculation about retail sector dynamics as discount retailers navigate a shifting consumer landscape. With the stock trading near its 52-week high and options activity intensifying, the move appears tied to broader sector momentum rather than company-specific news. The Discount Stores index outperformed the S&P 500 by over 250 basis points, suggesting a strategic repositioning in the market.

Retail Sector Expansion Drives Costco’s Intraday Rally
The surge in Costco’s stock price aligns with a broader upswing in the Discount Stores sector, driven by strategic store openings and resilient consumer demand. While no company-specific news was released, the sector’s 3.60% gain—led by Walmart’s 4.05% rally—reflects investor optimism about discount retail’s ability to absorb inflationary pressures. Costco’s position as a sector bellwether, combined with its 30.94% weight in the industry index, amplifies its sensitivity to sector-wide trends. The stock’s 2.79% gain mirrors the sector’s momentum, with technical indicators like the RSI (44.7) and MACD (-10.94) suggesting a short-term bullish bias.

Discount Stores Sector Outperforms S&P 500 as Costco Leads Rally
The Discount Stores sector’s 3.60% gain far outpaces the S&P 500’s 0.78% rise, with Costco’s 2.78% rally trailing only Walmart’s 4.05% surge. Dollar General (DG) and Dollar Tree (DLTR) also posted gains of 2.19% and 0.80%, respectively, while Ollie’s Bargain Outlet (OLLI) rose 1.13%. This sector-wide strength contrasts with broader market caution, as investors rotate into defensive plays amid rising interest rates. Costco’s performance reflects its dual role as a sector leader and a proxy for consumer spending resilience.

Options Playbook: High-Leverage Calls on Costco’s Bullish Momentum
• MACD: -10.94 (bullish divergence from signal line -13.11)
• RSI: 44.7 (oversold territory, suggesting potential rebound)
• Bollinger Bands: $918.48 (lower) to $982.95 (upper), with price near upper band
• 200-day MA: $968.50 (just above current price)
• Support/Resistance: 30D support at $985.55, 200D resistance at $967.41

Costco’s technical setup favors a continuation of the bullish trend, with key resistance at $985.55 and support at $967.41. The RSI’s oversold reading and MACD’s positive histogram suggest momentum remains intact. For options traders, the most compelling plays are high-leverage calls with moderate deltas and strong liquidity:

• COST20250815C970
- Strike: $970.00
- Expiration: 2025-08-15
- IV: 19.15% (moderate)
- Leverage Ratio: 76.25% (high)
- Delta: 0.518 (moderate)
- Theta: -2.418 (high time decay)
- Gamma: 0.012958 (high sensitivity)
- Turnover: 379,432 (liquid)
- Payoff at 5% upside: $38.50 (max(0, 970.001.05 - 970.00))
- Why it stands out: High leverage and gamma make this contract ideal for capitalizing on a breakout above $970.00, with strong liquidity for entry/exit.

• COST20250815C975
- Strike: $975.00
- Expiration: 2025-08-15
- IV: 18.59% (moderate)
- Leverage Ratio: 96.99% (very high)
- Delta: 0.4517 (moderate)
- Theta: -2.1698 (high time decay)
- Gamma: 0.013266 (high sensitivity)
- Turnover: 225,296 (liquid)
- Payoff at 5% upside: $57.50 (max(0, 970.001.05 - 975.00))
- Why it stands out: Exceptional leverage and gamma position this as a high-reward play if Costco breaks above $975.00, with sufficient liquidity to manage risk.

Aggressive bulls should consider COST20250815C970 into a breakout above $970.00, while high-risk traders may target COST20250815C975 for a 5% upside scenario.

Backtest Costco Wholesale Stock Performance
The 3% intraday surge had no impact on the performance of COST, as evidenced by the maximum return of 3.74% on the entire market, which was achieved on the maximum return day, indicating that the surge did not have a significant effect on the stock's performance.

Costco’s Rally Gains Momentum: Position for a Breakout Above $980
Costco’s intraday surge reflects a broader shift in investor sentiment toward the Discount Stores sector, driven by strategic store expansions and resilient consumer demand. The stock’s proximity to its 52-week high and strong technical indicators suggest a potential continuation of the bullish trend. Traders should monitor the $985.55 resistance level and the 200-day MA at $968.50 for directional clues. With Walmart (WMT) surging 4.05% as the sector leader, the retail discount theme remains compelling. Position for a breakout above $980 with tight stops below $967.41, and consider high-leverage calls for amplified exposure.