ROST does a dead cat bounce, it's still too early to buy into it
18 Dec, 201813 min read
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ROSS STORES INC delivered good returns on Tuesday. It grew by +0.78% to close at 78.89. It is currently trading -23% below it's 52 week high of 103.33.
ROST is currently in a down trend. Over the last three months 2 bearish signals have generated a profit of +8.6% for investors.
ROST has been underperforming the SP500 index in recent time, after having outperformed till 12 Nov, 2018. Over the last 2 years 11 months and 14 days, ROST outperformed the SP500 index on 52% days.
During the last three months ROST was mostly loss making and delivered on average -0.31% per day. It's best return during this period (of +4.47%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -9.38%) was on Tuesday, 20 Nov, 2018. There was initially a bullish trend during this period which started on 2 Nov, 2018 and went on till 8 Nov, 2018. The bullish trend returned +4.9% to investors. This was followed by a bearish trend that started on 9 Nov, 2018 and ended on 23 Nov, 2018. This bearish trend lost -24.48% of investor capital.
On monthly basis, ROST delivered profits in more months over the last year, than losses. ROST delivered profits less regularly than SP500 index. ROST was also a more risky investment than SP500 index as it's worst month in the last year, Nov 2018, returned -11.52% compared to -7.75% returned by SP500 index in Dec 2018. ROST had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both ROST and SP500 index significantly outperform during months when quarterly/annual results are announced.
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ROST is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ROST's volatility from 19 Sep, 2018 to 21 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that ROST has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
SP500 index has more chance of extreme outcomes than ROST. Therefore, SP500 must receive a lower allocation than ROST in your portfolio. SP500 index usually has shorter drawdown period than ROST.
On a general note (since you are interested in ROST), two instruments that deserve special mention are NSPR and TYHT. They have significantly outperformed the overall market.
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