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Costco Wholesale - COST - close: 43.33 chg: -0.32 stop: 44.60

Company Description:
Costco currently operates 458 warehouses, including 337 in the United States and Puerto Rico, 65 in Canada, 16 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 26 in Mexico. The Company also operates Costco Online, an electronic commerce web site, at www.costco.com and at www.costco.ca in Canada. The Company plans to open two additional new warehouses prior to the end of its fiscal year 2005, on August 28, 2005. (source: company press release or website)

Why We Like It:
COST may be one of our favorite places to shop but its stock is looking a but unhealthy here. The whole retail sector looks vulnerable after Wal-Mart issued concerns that rising gas prices was affecting its customers. Even COST had one analyst downgrade the company's estimates due to worries over fuel costs. Looking at the chart one can see that its oversold bounce has failed near $44.50 and under its 100-dma and exponential 200-dma. Technicals are bearish and its P&F chart points to a $33 target. We're going to suggest shorts here with a relatively tight stop and a target in the $40.50-40.00 range. Please note that we're going to try and maintain a tight stop because bears are facing what looks like support on its weekly chart (see below).


Picked on August 24 at $43.33
Change since picked: + 0.00
Earnings Date 10/06/05 (unconfirmed)
Average Daily Volume: 2.8 million

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Sonic Corp - SONC - close: 30.39 chg: -1.27 stop: 32.01

Company Description:
Sonic, America's Drive-In, originally started as a hamburger and root beer stand in 1953 in Shawnee, Okla., called Top Hat Drive-In, and then changed its name to Sonic in 1959. The first drive-in to adopt the Sonic name is still serving customers in Stillwater, Okla. Sonic has approximately 3,000 drive-ins coast to coast and in Mexico. More than a million customers eat at Sonic every day. (source: company press release or website)

Why We Like It:
This is a simple trade the channel play. SONC has been slowly descending in a channel since its peak back in March. The action over the past couple of weeks has been SONC trying to breakout over the stop of its channel. Now shares are turning lower and its technical oscillators are bearish. Its MACD has produced a new sell signal and its P&F chart points to a $25 target. Looking at the chart you can see that today's decline through technical support at its exponential 200-dma was fueled by stronger than average volume. We're going to suggest shorts here but more conservative traders may want to wait for a decline under the $30.00 mark. Our target is the $28.00 level.

Picked on August 24 at $30.39
Change since picked: + 0.00
Earnings Date 09/26/05 (unconfirmed)
Average Daily Volume: 537 thousand
 

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