NEW YORK (TheStreet) -- Because history tends to repeat itself, investors would be wise to consider Ross Stores' (ROST) trading pattern year ago, when its stock hit an all-time high before the clothing retailer issued a warning about holiday spending, which sent the stock spiraling down.
This year, shares of the company, which reports after the bell on Thursday, are close to another all-time high, and comments from the retailer about the holiday-shopping season should determine whether the stock's momentum will continue.
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The shares were trading at $82.66, up 50 cents, on Thursday morning. They're off from an all-time intraday high of $83.10, which was set on Nov. 13. They've since fallen after a downgrade from Canaccord Genuity downgraded on valuation concerns.
Here's how to trade Ross Stores, which includes exit strategies given the stock's momentum.
Investors in Ross Stores shares should enter a good 'til canceled limit order to sell on strength at a key technical level of $86.45 and employ a sell-stop below its key weekly moving average at $79.35, keeping in mind that this average will be rising each week.
If you are looking to buy Ross Stores on weakness, enter a good 'till canceled limit order to buy on weakness at a key technical level of $73.05.
Here's the daily chart for Ross Stores.
Courtesy of MetaStock Xenith
The daily chart for Ross Stores ($82.16) shows that the 2013 momentum run-up began when the stock broke out above its 200-day simple moving average (green line) at $61.35 on April 10, 2013. The momentum period ended with the high at $81.99, which was set on Nov. 18, 2013, two days before the company's disappointing forecast. Shares of Ross Stores began 2014 in a downtrend that last until July, before the stock reversed course.
Here's the weekly chart for Ross Stores.Courtesy of MetaStock Xenith
The weekly chart for Ross Stores shows that the 200-week SMA (green line) was the staging area from which the longer-term momentum run began when this average was $15.37 in March 2009.
Note that the stock had two major corrections. The first was a 27% slide from $70.82 in August 2012 to $52.01 at the end of 2012. The second was the one that began a year ago.
The weekly chart is positive but overbought, with its key weekly moving average at $79.35. The momentum reading shown in red at the bottom of the graph is overbought with a reading of $91.57 well above the overbought threshold of $80.
At the time of publication, the author held no positions in the stock mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates ROSS STORES INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROSS STORES INC (ROST) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: ROST Ratings Report