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The central theses

  • Costco shares rose 2.5% in extended trading on Wednesday after the retailer raised membership fees for the first time since 2017 and reported a jump in sales in June.
  • Costco shares recently broke out of a pennant pattern that suggests a continuation of the stock's long-term uptrend.
  • The measuring principle, which calculates the distance of the uptrend preceding the pennant and adds that amount to the breakout point of the pattern, predicts a price target for Costco shares of $1,032.

Costco Wholesale (COST) shares rose in extended trading on Wednesday after the retailer raised membership fees for the first time since 2017 and reported a jump in sales in June.

Starting September 1, fees for individual members will rise to $65 and for executive members to $130 (previously $60 and $120). That's an increase of 8 percent for both categories. The fee increases, which Costco first warned about in May, affect about 52 million memberships in the U.S. and Canada, about half of which are in the executive category.

In the retailer's most recent quarter, membership fees totaled $1.1 billion, or about 2 percent of the company's total revenue of $58.5 billion.

Costco also reported Wednesday that June net sales for the five-week period ended July 7 were $24.48 billion, up 7.4 percent from $22.78 billion a year earlier, suggesting the retailer's business model of offering a wide range of products in large quantities at low prices continues to resonate with consumers in an inflationary environment.

Costco shares remain in long-term uptrend

Costco shares have been in a long-term uptrend since the 50-day moving average (MA) crossed above the 200-day MA in May last year, forming a bullish golden cross signal.

Recently, the stock's gains have accelerated following a decline to the 50-day moving average, with the price breaking out of a pennant pattern earlier this month, suggesting a continuation of the current trend.

Keep an eye on this key level as things continue to move higher

With Costco stock trading near its all-time high (ATH) and limited comparisons to past price performance, investors can use the measurement principle to estimate a potential price target.

To do this, we calculate the distance of the uptrend before the pennant in dollars and apply that amount to the breakout point of the pattern.

For example, we add $177 to $855, which gives us a price target of $1,032. This creates an area on the chart where shares may face additional selling pressure, especially if other indicators simultaneously point to overbought conditions.

Costco shares rose 2.5% to $906.70 in after-hours trading Wednesday.

The commentary, opinions and analysis expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more information.

At the time of writing, the author does not own any of the securities mentioned above.

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