Ross Stores Reports With Overbought Technical Charts

Discount retailer Ross Stores, Inc. (ROST) offers off-price brand-named apparel and household goods, and the stock has had strong momentum as stores are able to draw in shoppers. The stock is also drawing in investors as the stock traded to an all-time intraday high of $94.11 on Tuesday, Aug. 21. The stock closed that day at $92.89, up 15.8% year to date and up a bull market 25.9% since setting its 2018 low of $73.76 on May 7. The stock is above a "golden cross" on its daily chart and is positive but overbought on its weekly chart.

Analysts expect Ross Stores to disclose quarterly earnings per share of $1.00 when the company reports results after the closing bell on Thursday, Aug. 23. The retailer has been successful in cost-control measures, store-expansion plans and expanded product offerings. Ross has found a niche of offering popular merchandise at discount prices. (See also: 3 Retailers to Buy Ahead of Earnings.)

The daily chart for Ross Stores

Daily technical chart showing the performance of Ross Stores, Inc. (ROST) stock
Courtesy of MetaStock Xenith

Ross Stores has been above a "golden cross" since Nov. 3, 2017, when the stock closed at $64.13. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. The stock began 2018 testing its annual risky level, now a pivot at $85.13. After the stock set its 2018 high of $85.66 on Jan. 29, the correction took the stock to as low as $73.76 on March 7. The stock returned to its annual pivot on June 6 and then continued higher. Ross shares are above my quarterly and monthly pivots of $86.82 and $87.98, respectively, with my semiannual risky level of $95.67.

The weekly chart for Ross Stores

Weekly technical chart showing the performance of Ross Stores, Inc. (ROST) stock
Courtesy of MetaStock Xenith

The weekly chart for Ross Stores is positive but overbought, with the stock above its five-week modified moving average of $88.85. The stock is well above its 200-week simple moving average of $61.61, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 89.24 this week, up from 87.73 on Aug. 17 and moving closer to the 90.00 reading that would make the stock an "inflating parabolic bubble."

Given these charts and analysis, investors should buy Ross shares on weakness to my monthly, quarterly and annual value levels of $87.98, $86.82 and $85.13, respectively, and reduce holdings on strength to my semiannual risky level of $95.67. (For more, check out: 4 Retail Stocks Shattering Records Despite Amazon Threat.)

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