Kudos to Costco Wholesale Corporation (NASDAQ:COST) for a blowout November. Same-store sales r0se 10.8% last month, catapulting COST stock above and beyond November’s already impressive 14% advance.

For fans and followers (and presumably owners) of Costco stock, the report was held up as evidence that a rekindling effort was taking hold, with more of the same on the way. And maybe the optimists are right.

Somehow though, the decided sales victory after a red hot runup in November feels a little bit artificial. Indeed, COST stock looks ripe for a tumble even if the holiday shopping season ends up going relatively well for the membership-based retailer. And Thursday’s earnings report could end up being such a catalyst even if the numbers are “good.”

Caution is advised.

Trading COST Stock

Growth hasn’t been a problem for Costco. In fact, in light of the growing degree of competition from the likes of Wal-Mart Stores Inc (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN). Those two giants are making life rather miserable for everyone else. So to see Costco making progress organically as well as inorganically is head-turning.

At a trailing price-earnings ratio of 30.9 and a forward-looking one of 26.5 though, COST stock may be priced for growth that simply isn’t in the cards. Thursday’s first-quarter report, due after the closing bell rings, could serve as something of a wake-up call.

It’s mostly about the chart at this point though, with the stage well set for a wave of profit-taking, regardless of the results. Costco stock is bumping into an all-too-familiar technical line. If history repeats itself, November’s runup is about to be wiped away.

Second Thoughts on COST Stock

Take a look. Last week’s high is in line with three of the past four major peaks going back to early 2015, and the fourth one, from late 2015, is quite close to being in line with the others. Click to Enlarge

To that end, the chart has already indicated traders are having second thoughts here, with Costco shares peeling back from that technical ceiling after bumping into it last week. So far the weakness has been muted. But that’s only because those traders are waiting on the next round of news to turn into a direction. Make no mistake though. The bias here, even if unconsciously, is a bearish one.

The good news is there’s a floor that’s been developed in tandem with the ceiling. The floor, in fact, has been just as reliable and just as well-defined as the ceiling has. Any selloff should be contained within this zone that’s kept Costco shares trapped for the past three years now.

COST Stock Earnings Outlook

Anything that could be interpreted as bad news likely will be interpreted as such.

As of the latest look, the pros are calling for a fiscal first quarter top line of $31.4 billion, and income of $1.34 per share of COST stock. The latter is 14% better than the year-ago comparison, while the former would be up 11.8% from fiscal Q1-2017. In this particular case, however, the market’s going to be looking well beyond the basic numbers. Of the utmost importance on Thursday will be profit margins and revenue from membership fees.

And it bears repeating– a key piece of Q4-2017’s sharp revenue increase was spurred by a membership fee hike. All told, the retailer collected $943 million in fees last quarter, up 13% versus the year-ago figure.

The club retailer is still successfully selling these paying members more and more goods, mind you. The fourth quarter’s merchandise sales tally was up a little more than 6% on a same-store basis. And new store openings helped drive overall revenue growth of 16%. Competition is taking a toll, however. Q4’s gross margins fell 15 basis points, with the company forced to become more competitive with established rivals. The pros are calling for another wave of shrinking gross margins for fiscal Q1-2018 as well.

Bottom Line on COST Stock

To its credit, operating margins might hold steady this time around, with the retailer keeping selling and administrative expenses in check, and collecting more membership fees to offset any expansion-driven cost increases.

Even that’s cause for concern though, with membership growth slowing down and Costco adding a couple of new (and costlier) delivery options. Membership renewal rates fell to 90% last year, like the year before, from 91% in 2015. Not surprisingly, that’s when Amazon turned up the heat on Amazon Prime and its grocery business. That’s also when Walart started a successful regrouping effort.

If the market is going to find a red flag to use as a profit-taking excuse, odds are good it will have something to do with those metrics.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.