Costco could be a winner from the big market rotation. How to trade it

When the air finally starts coming out of the high-flying tech sector, that capital rarely just sits in cash. Instead, we see a classic sector rotation where institutional money flows into the boring, reliable corners of the market, such as Consumer Staples (XLP) and Healthcare (XLV). Costco (COST) is an absolute heavyweight in the XLP sector, making it a prime candidate to catch this rotational inflow. In my book, Mean Reversion Trading, I frequently discuss the importance of technical indicators to time entries. However, for today's specific setup, I am putting the oscillators aside. We are not using MACD, DMI or RSI. Instead, we are keeping things incredibly simple and relying strictly on the traditional, structural concepts of support and resistance. As you can see in the nine-month chart below, COST has taken a dip and is actively testing a historically significant support zone right around the $950 level. If you look back at the left side of the chart, this exact $950 line acted as a heavy ceiling of resistance in the past. Once price finally broke through it, that old resistance flipped into a reliable support floor, which is exactly where the stock found its footing and initiated the current bounce. To play this support bounce, I am targeting the 950/955 bull call spread with a July 24th expiration. This trade structure allows us to participate in the recovery while strictly capping our downside risk. …