As we noted on the evening of April 9, 2017:
Of all of the struggling retailers, the one that should be fine is Ross Stores (ROST). But what’s piquing my interest in ROST isn’t just how fundamentally undervalued it’s become, it’s how technically oversold it is at its 200-day moving average. First, we can see just how oversold ROST is on relative strength, MACD and Williams’ %R, but also take a look at the history of the stock at its 200-day. Since the start of 2016, each time the stock dips even slightly below that average, it snaps back not long after, especially between June and July 2016.
All of those indicators combined leads me to believe ROST is now overdue for a move higher. And we’re recommending two ways to trade the opportunity. One, consider buying to open the ROST May 2017 62.50 call at market. And, or two buy to open the May 65 call at market as well. Both should do well.
In fact, after testing the other side of its 200-day moving average, the stock did exactly what we had hoped it would do. It bounced on oversold RSI, MACD, and Williams’ %R. The stock last traded at $64.66 and it’s still running.
We’d like to see if run back to $66.33 before we close the options trades.
Since April 10, the ROST May 62.50 calls have run from $2.50 to $3.05. The ROST May 65 calls have run from $1.15 to $1.55. Not bad so far. Hold both.