Dollar Tree, Inc. operates variety retail stores in the United States and Canada. It operates in two segments, Dollar Tree and Family Dollar. The Dollar Tree segment offers merchandise at the fixed price of $1.00. The Family Dollar segment operates general merchandise discount retail stores that offer consumable merchandise, which comprise food, tobacco, health and beauty aids, household chemicals, paper products, hardware and automotive supplies, diapers, batteries, and pet food and supplies; and home products, including housewares, home décor, and giftware, as well as domestics, such as blankets, sheets, and towels. As of January 28, 2017, the company operated 14,334 stores in 48 states and the District of Columbia, and 5 Canadian provinces.
Take a look at the 1-year chart of Dollar (NYSE: DLTR) below with added notations:
Over the past two months, DLTR has fallen into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. The pattern has formed a resistance at $71 (red), and a $66 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: DLTR is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $66 or on a breakout above $71. The ideal short opportunity would be on a break below $66.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT