Discount retailer Ross Stores, Inc. (ROST) extended its winning streak of beating analysts' earnings per share estimates to 20 consecutive quarters when it released results after the markets closed on Thursday, May 23. However, the reaction to earnings was negative, as improved merchandise margins were outweighed by increases in freight and wage costs.

Ross Stores stock closed Thursday's session ahead of the earnings report at $94.51, up 13.6% year to date and in bull market territory at 24.5% above its Dec. 24 low of $75.91. This is a consolidation of the bear market decline of 27% from its all-time intraday high of $104.35 set on Nov. 8 to its Dec. 24 low. Friday's open failed to hold its 200-day simple moving average at $93.05, which indicates risk to its monthly and semiannual value levels at $91.84 and $89.28, respectively.

The stock is not cheap, as its P/E ratio is 22.19 and its dividend yield is 1.08%, according to Macrotrends.

The daily chart for Ross Stores

Daily chart showing the share price performance of Ross Stores, Inc. (ROST)
Refinitiv XENITH

The daily chart for Ross Stores clearly shows the bear market decline that ended on Dec. 24. The Dec. 31 close of $83.20 was a major input into my proprietary analytics, and the semiannual value level remains at $89.28, with an annual pivot at $95.62. The close of $93.10 on March 29 was also an input to my analytics, and the risky level for the second quarter is $97.19. The April 30 close of $97.66 was the most recent input, and the pivot for May is at $91.84, which was tested on Friday.

The weekly chart for Ross Stores 

Weekly chart showing the share price performance of Ross Stores, Inc. (ROST)
Refinitiv XENITH

The weekly chart for Ross Stores is negative, with the stock below its five-week modified moving average of $95.59. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $70.24. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 71.63 this week, down from 77.53 on May 17.

Trading strategy: Buy Ross Stores stock on weakness to its monthly and semiannual value levels at $91.84 and $89.28, respectively, and reduce holdings on strength to its annual and quarterly pivots at $95.62 and $97.19, respectively.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.