Investors in Ross Stores (ROST) may want to consider booking profits as upside momentum has diverged from the price action in recent weeks.
In this one-year daily bar chart of ROST, below, we can see that an uptrend is in progress but it is harder to see whether the uptrend is in jeopardy of reversing. Let's look closer. Prices are testing and could close below the rising 50-day moving average line. The rising 200-day average line is comfortably below and a decline under $61 would be needed to break that line. The On-Balance-Volume (OBV) line has diverged from the price action in November and December by not making a new high when prices made new highs.
In the lower panel is the momentum indicator, which also shows a bearish divergence with a lower momentum reading in December as prices made an equal high.
In this three-year weekly chart of ROST, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has moved up with the price action on this timeframe and confirms the advance. The 12-week momentum study, however, shows a significant bearish divergence between the August price high and the November price high as momentum readings were much lower on the second high. A divergence that happens over several months is more important than one that happens over just a few weeks.
Strategy: With a weekly bearish divergence signaling caution I would recommend taking some profits or raising stop loss protection. A close below $61 on ROST should prompt additional liquidation or profit-taking.