Costco Stock Analysis: Oversold RSI, Reversal Signals, and Price Outlook
Costco Wholesale Corporation (COST) is currently showing signs of a potential market reversal after its Relative Strength Index (RSI) dropped into oversold territory. This raises an important question for traders and investors: is now a good time to buy Costco stock, or could further downside occur in the short term?
Technical Analysis: Oversold RSI and Reversal Indicators
From a technical analysis perspective, Costco stock appears positioned for a potential bullish reversal. On Friday, December 17, 2025, the RSI dipped into the oversold range, a condition that historically increases the likelihood of a price rebound.
This reversal thesis is further supported by a bounce from the lower Bollinger Band, which occurred simultaneously with the oversold RSI reading. The combination of these two indicators often signals selling exhaustion and the early stages of renewed buying interest.
Additionally, the Directional Movement Index (DMI) points toward a shift in market control. The DI+ line has surged upward while the DI− line has declined, indicating that bullish momentum may be returning as sellers lose strength.
Fundamental Analysis: Valuation and Price Targets
Costco’s fundamentals continue to justify its long-term appeal. The stock currently trades at a P/E ratio of 46.21, reflecting its status as a premium-quality company. However, its forward P/E of 38.91 suggests improving valuation over time as earnings growth materialises, making Costco closer to fair value.
Based on valuation metrics, estimated price targets include:
These projections are reinforced by analyst price targets averaging $1,061.83, which implies a 23.41% upside from current levels. Together with the oversold RSI reading, this suggests that Costco stock may be undervalued in the short to medium term.
Outlook for Traders and Investors
With technical indicators signalling a potential reversal and strong underlying fundamentals, Costco could present a compelling buying opportunity for both traders and long-term investors.
That said, to manage downside risk, it may be prudent to wait for confirmation of a bullish reversal, such as higher lows or increased volume, before entering a position. Confirmation would strengthen the probability that the current pullback represents a temporary correction rather than the start of a deeper decline.
Overall outlook: cautiously bullish, with strong upside potential pending confirmation.
