Option traders appear to be setting up for a bullish move on Cobalt International Energy, Inc. (CIE). Traders plowed into 1,553 new call option contracts -- 4.65 times the average volume -- on the stock on Monday. And we know that traders were eager to get into this trade because 98% of the trades came in on the ask price.

Cobalt just bounced up off of support at $7. The stock closed Monday at $8.25, down 1.32% during the past month.

Costco (COST) reported Thursday morning a 46% jump in third-quarter earnings. The warehouse retailer had solid sales during the third quarter, which helped push the company's profit to $306 million, or 68 cents per share. Membership revenue also increased 20%. The earnings topped the consensus estimate by two cents per share while revenue of $17.78 billion handily topped the estimates of $17.63 billion.

Technically, the stock finds itself at a bit of a crossroads. The shares have dropped enough in the past few weeks that they are now facing overhead resistance from their 50-week moving average.

The Federal Reserve's next Beige Book report is scheduled to be released this week. This report is a compilation of anecdotal information on current economic conditions from each of the 12 Federal Reserve Bank districts, and it is released eight times a year. The data comes from interviews with business contacts, economists, market experts, and other sources. The previous report, released in January, showed some improvement in most districts and growth in consumer spending over the holiday period, though unemployment remained high. The December report showed modest improvement in eight of the districts.

Retailers were in the earnings spotlight last week and for the most part made a strong showing of it. Even as the earnings season winds down, some more retailers are scheduled to release quarterly results this week.

Retailers appear to have been rescued at the last minute, according to data from the International Council of Shopping Centers. Shoppers looking for deals the week before Christmas -- and making up for the day lost to stormy weather on the East Coast -- spent aggressively, sparing the retail sector a dismal 2008-like performance.

The healthy conclusion to the holiday season led to a positive change from November and made December one of only three months (including September and October) in which retail sales increased year-over-year.

This week, the world's top retailers will tell investors how the much-discussed holiday season went. Analysts expect a year-over-year gain of 1.3% for stores open at least a year, which of course uses a dismal 2008 as a benchmark.

The holiday shopping season is the last chance retailers get to pump up their financial statements before the close of their fiscal year, which usually comes at the end of January. For some retailers, up to 40% of their revenue comes in the weeks heading into Christmas.

Food stamps are pumping up revenue at retailers across the country. Costco (COST), Wal-Mart (WMT) and others are seeing rushes an hour before funds are credited to electronic benefits transfer cards. Wal-Mart's CFO, Tom Schoewe, has noted the trend, telling Reuters, "Once the clock strikes midnight [on the last day of the month] and EBT cards are charged, you can see our results start to tick up."

Spending via EBT is not only increasing, it generally happens quickly. JPMorgan (JPM), which runs EBT programs for more than 20 states, reports that buyers run through 85% of food stamp funds within the first three days of their availability.

Costco Wholesale (COST - option chain) stock is trading lower today after the company announced its same-store sales rose 6.0 percent in November, missing analysts' forecasts of an 8.1 percent increase. While the fact that sales are up 6% is encouraging, November 2008 was when consumers were really cutting back, so a bigger increase would indicate that the company is back on solid footing. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on COST.

This morning, COST opened at $59.40. So far today the stock has hit a high of $59.57 and a low of $59.00. As of 11:15, COST is trading at $59.23, down $1.64 (-2.7%). The chart for COST looks neutral and S&P gives COST a neutral 3 STARS (out of 5) hold ranking.

Consumer borrowing fell for the eighth straight month in September. This record-setting streak is due largely to tightening by lenders, unemployment and the conservative preference to pay down debt rather than spend. This widespread fit of fiscal responsibility, economists fret, could prevent a recovery from taking root, since consumer spending is responsible for 70% of the U.S. economy. This conventional thinking, of course, overlooks the fact that an eventual increase in spending that isn't fueled by consumer spending will yield a recovery that's more likely to last.

According to the Federal Reserve, borrowing fell at an annual rate of $14.8 billion in September -- it's biggest drop since July and much larger than the $10 billion predicted by economists. The behavior is exactly what you'd find in people worried about losing their jobs or focused on rebuilding safety funds and investment portfolios. Those who want to borrow are finding banks won't be complicit this time, as they clamp down on lending practices.

There's a chill in the air and a slight up-tick in confidence. Holiday discounts are coming a bit earlier, too. For retailers, this has been a great combination, leading to the second consecutive month in which retail sales increased.

This follows more than a year of drops. Consumers aren't going crazy, but they are loosening their wallets a little bit. Consumer spending accounts for 70% of the U.S. economy, and the coming holiday season is where the action is -- for the retail sector and, consequently, for everyone else.

Costco Wholesale Corp. (NASDAQ: COST) is realizing that many of its customers are still living on hard times these days, even the news that the economy is rebounding. That doesn't mean lost jobs will pop back any time soon, and as such, the wholesale retailer will be accepting food stamps at all of its U.S. locations.

Wall Street is cheering the latest earnings report from Costco Wholesale Corporation (NASDAQ: COST), with the shares adding more than 3% within the first hour of trading. This morning, as Tom Johansmeyer reported, the wholesale club reported a 6% slide in fiscal fourth-quarter earnings, but the results nevertheless exceeded analysts' expectations.

In the wake of COST's report, analyst Brian Sozzi of Wall Street Strategies reiterated his Buy rating and $66 price target on the equity. "In our view, 4Q09 will go a long way in supporting a higher valuation for Costco," wrote Sozzi in a research note this morning. "The company has managed to control costs, drive traffic to its warehouses consistently throughout the economic downturn, paid $300 million in annual dividends in FY09 (payout ratio of 26.0% second to only Wal-Mart in the sector), and has catalysts on the horizon to showcase earnings power above currently modeled for consensus EPS."

Costco's (NASDAQ: COST) profits are off 6% for its fiscal fourth quarter. A stronger dollar and increased employee benefits costs are cited as the reasons. Nonetheless, the retailer did beat analyst expectations.

The company, which operates warehouse clubs, pulled in earnings of $374 million (85 cents per share) for the quarter ending August 30, 2009. While this is down from $398 million (90 cents per share) a year earlier, it was good enough to top the 77 cents per share that analysts polled by Thomson Reuters had forecast.

Costco Wholesale (NASDAQ: COST - option chain) stock is dropping today after the company reported a third-quarter profit of $209.6 million or 48 cents per share. Analysts were looking for a profit of 53 cents per share. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on COST.

This morning, COST opened at $47.94. So far today the stock has hit a low of $46.54 and a high of $48.91. As of 11:40, COST is trading at $47.81, down $1.02 (-2.1%). The chart for COST looks neutral and S&P gives COST a neutral 3 STARS (out of 5) hold ranking.

This post is part of a series featuring bargain stocks that are worth a look now. See more Cheap Stocks.

In troubled economic times, it seems like a no-brainer that discount retailers will fare better than their mid-market competitors. Of the discount group, Costco Wholesale (NASDAQ: COST) garners extra points for its brand recognition, broad geographic reach, and dedication to its customers.

Speaking of customer service, I recall being mildly shocked earlier this year upon reading this BusinessWeek article, which alleges that Costco often chooses to cater to its customer base rather than pleasing its investors. Amid skyrocketing commodity costs in July, the mega-retailer warned of a quarterly earnings shortfall, because of a reluctance to hike its own prices and potentially alienate its customer base.

I'm no CEO, but to my mind, the happiness of Costco's investors is directly pegged to how satisfied its customers are. If shoppers are turned off by price increases and take their business over to, say, Sam's Club -- what have the investors won? It takes a clear-headed management team to consider the long-term effects on its core customer base over the short-term demands of frustrated traders.

"While many firms are struggling to survive, a lucky minority are built to weather the storm better," says growth stock specialist Karim Rahemtulla. In Xcelerated Profits Report, he eyes Costco Wholesale (NASDAQ: COST).

"Thanks to rising inflation and unemployment, coupled with a beaten-up economy, many retailers are braced for a harsh new reality this holiday season.

"Consumers have much tighter budgets and are cutting back on whatever they can. And that's where some 'one-stop' retailers like Costco can really take advantage.

"Although customers are more likely to avoid the electronics and other non-necessity stocking sections of the store these days, they still need to eat.

"So while other non-food departments are seeing a sales slowdown, Goldman Sachs recently reported that Costco is likely to enjoy strong food sales, which offset that.

"Goldman also noted that Costco boasts a strong balance sheet, with almost $3.3 billion in cash on the books, plus ample liquidity - factors that could encourage management to implement a stock buyback program.

"Compared to other retailers who are flat-out dreading this holiday season, that puts Costco in a strong position.

"And because the store has such a diverse range of products, all under one roof and available at bargain prices, Costco is one firm better prepared to ride out what could be a brutal season for retailers."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.