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Five Below (FIVE) - Get Five Below, Inc. Report is a chain of discount stores that sells products that cost $5 per item or less targeted primarily to children and teenagers. The retailer reports earnings after the close Wed., Aug. 28, with the stock falling below a "death cross" on Aug. 20. This is offset by the possibility that the weekly chart will become positive given a close this week above the five-week modified moving average at $117.14. This mixed technical profile results in the need to monitor a neutral zone between its semiannual pivot at $110.30 and the five-week MMA at $117.14 post-earnings. My call is to buy weakness to the annual value level at $102.02 or reduce holdings on a weekly close below $117.14.

The retailer closed Tuesday at $115.16 up 12.5% year to date and in bull market territory 33% above its Dec. 24 low at $86.57. The stock is also in bear market territory 22.3% below its all-time intraday high of $148.21 set on April 30. This is a difficult environment for a mall-based retailer that is overvalued with a P/E ratio of 44.30 without paying a dividend, according to Macrotrends.

Analysts expect Five Below to earn 50 cents per share when they report after the closing bell on Aug. 28. The company matched earnings its prior quarter released on June 5, which ended a winning streak of beating earnings-per-share estimates in 14 consecutive quarters. The retailer's focus on merchandise targeted to pre-teens is enhanced by e-commerce initiatives, which is viewed as positive by Wall Street. The company is also in expansion mode opening stores in vibrant shopping centers around the country. At issue is that their operating margins are under pressure, which makes guidance a key in a volatile market for retail stocks.

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The Daily Chart for Five Below

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Courtesy of Refinitiv XENITH

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The daily chart for Five Below shows the formation of a "death cross" on Aug. 20, when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices lie ahead. The close of $102.31 on Dec. 31 was an important input to my proprietary analytics and the annual value level remains at $102.02. This level was penetrated and held on Jan. 3. The close of $120.02 on June 28 was another important input to may analytics. Its semiannual pivot is $110.30, with its third-quarter risky level at $148.17. The July 31 close of $117.46 was an input to my analytics and the monthly risky level for August is $139.81. The 50-day and 200-day simple moving averages are $118.99 and $120.96, respectively.

The Weekly Chart for Five Below

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Courtesy of Refinitiv XENITH

The weekly chart for Five Below is neutral with the stock below its five-week modified moving average of $117.14. The stock is well above its 200-week simple moving average or "reversion to the mean" at $70.85. The 12x3x3 weekly slow stochastic reading is projected to rise to 26.52 this week, up from 22.89 on Aug. 23. A close this week above $117.14 will upgrade the weekly chart to positive.

Trading Strategy: Buy weakness to the annual value level at $102.02 and reduce holdings on a weekly close between the semiannual pivot at $110.30 and the five-week MMA at $117.14.

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 annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on July 31. The quarterly level was changed at the end of June. 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 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 its 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.