Ross Stores rises after earnings, but a good strategy is needed

Shares of discount retailer Ross Stores (ROST) widened at the opening of trading on Friday as the company reported strong earnings gains and bullish forecasts. Impressive.

Let’s look at charts and indicators.

In this daily bar chart from ROST, below, we can see a bullish set-up ahead of Friday’s upper gap. Prices are coming off their first “impressions” and it’s too early to guess where ROST will close today. A basic pattern has been playing since February. We can see a receding left shoulder in February/March, a late June head and a right shoulder in October.

Trading volume does not appear to be increasing after the head, but the On-Balance-Volume (OBV) line shows some improvement from June. The MACD (Moving Average Convergence Divergence) oscillator is bullish.

In this weekly Japanese candlestick chart from ROST, below, we see a mixed picture. This week’s candle is not yet drawn. Prices are testing early 2022 highs and we don’t know what upper shadow we will have this week. ROST is above the 40-week moving average.

The weekly OBV line shows an uneven recovery from June. The MACD oscillator is currently crossing the zero line for an outright buy signal.

In this daily ROST dot-and-digit chart below, we can see that prices have reached an upward price target at the $112 area.

In this weekly Point and Figure chart from ROST, below, we can see a price target in the $178 area.

Basic strategy: Developing a strategy on ROST is a problem for a technical analyst. A fundamental analyst can raise his rating to “buy” and not suggest a breakpoint where he is wrong. They may not give you a bid level.

For me, a recommendation should balance risk (a stop point), a buy price and a price target. Friday’s gap on ROST makes the risk too big against the price target. I will need to see more trading to generate a good strategy. Stay tuned.

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