Costco Surges 2.5% on Intraday Rally: What's Fueling the Momentum?

Summary
• Costco (COST) trades at $876.00, up 2.52% from its $854.50 previous close
• Intraday range spans $860.85 to $878.78, with 172,802 shares traded
• Leverage Shares 2X Long COST ETF (COTG) jumps 5.03%, outpacing the stock
• RSI at 31.54 signals oversold conditions, while MACD (-11.28) hints at potential reversal
Costco’s intraday surge defies its long-term bearish trend, with technical indicators flashing mixed signals. The stock’s 2.5% rally has outpaced the Discount Stores sector leader Walmart (WMT), which gained 0.75%. High-conviction options activity and leveraged ETF flows suggest aggressive positioning ahead of the January 9 expiration cycle.

Technical Rebound Drives Costco's Intraday Surge
Costco’s 2.5% intraday gain reflects a technical rebound from its 52-week low of $844.06. The RSI (31.54) has entered oversold territory, while the MACD (-11.28) crossed above its signal line (-12.17), indicating potential short-term reversal. Price action shows a bullish breakout above the 30-day moving average ($881.61), with volume surging to 0.39% of its 52-week average. The stock’s proximity to the Bollinger Bands upper band ($899.10) suggests momentum traders are capitalizing on a mean-reversion play.

Discount Stores Sector Trails Costco's Rally as Walmart Gains 0.75%
Costco’s 2.5% rally outperformed the sector leader Walmart (WMT), which rose 0.75%. The Discount Stores sector lacks a unified catalyst, with no sector-specific news driving the move. Costco’s outperformance highlights its unique technical setup, including a tighter Bollinger Bands squeeze and higher implied volatility in its options chain compared to peers.

High-Leverage Options and ETFs to Capitalize on Costco's Volatility
• 200-day MA: $950.64 (below) | RSI: 31.54 (oversold) | MACD: -11.28 (bullish crossover) | Bollinger Bands: $841.60–$899.10
• Key levels: 200D MA at $950.64 (resistance), 30D MA at $881.61 (support), and 200D support at $854.34
• Leverage Shares 2X Long COST ETF (COTG) surged 5.03%, amplifying the stock’s 2.5% move. Traders should monitor the ETF’s liquidity and gamma sensitivity as a proxy for retail positioning.
Top Options Picks:
1. COST20260109C875 (Call, $875 strike, Jan 9 expiry):
• Implied Volatility: 20.19% (moderate)
• Lverage Ratio: 96.60% (high)
• Delta: 0.5353 (moderate sensitivity)
• Theta: -4.12 (high time decay)
• Gamma: 0.0192 (high sensitivity to price moves)
• Turnover: $844,956 (liquid)
This contract offers aggressive leverage with a delta balancing sensitivity and capital efficiency. A 5% upside to $919.80 would yield a $44.80 payoff, translating to a 53.5% return on the $84.956 notional.
2. COST20260109C885 (Call, $885 strike, Jan 9 expiry):
• Implied Volatility: 20.68% (moderate)
• Lverage Ratio: 177.00% (very high)
• Delta: 0.3511 (lower sensitivity)
• Theta: -2.96 (moderate time decay)
• Gamma: 0.0175 (high sensitivity)
• Turnover: $290,905 (liquid)
This high-leverage contract benefits from a 5% upside scenario, with a $34.80 payoff on a $290,905 notional. Its lower delta reduces near-term directional risk while maintaining gamma exposure to price swings.
Aggressive bulls may consider COST20260109C875 into a breakout above $881.61, while COST20260109C885 offers asymmetric upside for a sustained rally.

Backtest Costco Wholesale Stock Performance
The backtest of Costco's (COST) performance after a 3% intraday increase from 2022 to now shows favorable results. The 3-day win rate is 52.22%, the 10-day win rate is 60.15%, and the 30-day win rate is 57.45%, indicating that the stock tends to experience positive returns in the short term following the intraday surge. The maximum return during the backtest period was 3.45%, which occurred on day 59, suggesting that there is potential for gains but also the possibility of moderate volatility.

Position for Costco's Volatility: Key Levels and Expiry-Driven Moves
Costco’s 2.5% intraday surge reflects a technical rebound from oversold levels, with options activity and leveraged ETF flows amplifying momentum. The stock’s proximity to the 30-day MA ($881.61) and 200-day MA ($950.64) creates a critical juncture for trend continuation. Traders should watch the 200-day MA as a liquidity test and the 854.34 support level for a potential breakdown. With Walmart (WMT) up 0.75%, sector divergence suggests Costco’s move is driven by technical positioning rather than macro themes. Aggressive bulls may target COST20260109C875 for a breakout above $881.61, while conservative traders should monitor the 854.34 support for a potential reversal.