Retail Stock Trades Near Bullish Trendline Before Earnings

ROST call buying has been a prominent strategy among options traders

We're always digging through data from Schaeffer's Senior Quantitative Analyst Rocky White, and this week Ross Stores, Inc. (NASDAQ:ROST) popped up as a name to watch. Considering what's been happening in the retailer sector, we figured we'd take a closer look at ROST stock, especially since the company reports earnings after the close tonight.

Starting with White's data, the security has pulled back to the 200-day moving average, and the prior three signals of this type have all produced one-month gains, with an average rise of 12.7%. The stock was last seen trading at $94.22, so another move of this type would put it above $106 -- all-time high territory. Of course, an ugly turn in the earnings booth could render this technical data meaningless.

An ugly outcome is exactly what Ross Stores gave bulls this time last year, when it fell 6.8% the day after earnings. Overall, it's moved 5.7% in post-earnings sessions during the past two years, and this time the options market is pricing in a 6.6% swing for Friday's trading. As for sentiment, bulls have been in control, based on the high levels of call buying seen in recent days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Meanwhile, most analysts have handed out "strong buy" recommendations on ROST, though nine still have tepid "holds" on the books. And while short interest rose some in recent reporting periods, it still accounts for just 1.6% of the equity's total float.