:max_bytes(150000):strip_icc():format(jpeg)/DLTRChart-e5cf888c205f45de8aebdbcb564547da.gif)
Key Takeaways
- Dollar Tree shares fell 34% in the third quarter as the discount retailer continues to face pressures from a challenging macro environment that has caused financially constrained consumers to rein in spending.
- The stock’s September sell-off occurred on the highest monthly trading volume since March 2009, potentially flagging capitulation selling in the shares.
- Investors should monitor key price levels on Dollar Tree’s monthly chart around $70 and $54, while watching key resistance areas near $96 and $115.
Dollar Tree (DLTR) shares tumbled 34% in the third quarter, making it the S&P 500’s fifth worst performing stock over the period, as a challenging macro environment has caused financially constrained consumers to rein in spending on discretionary products.
The discount retailer, whose stock has lost around half its value since the start of the year, announced earlier this year it was exploring strategic alternatives, including selling or spinning off the Family Dollar brand. It also announced plans to close 1,000 stores in an effort to improve profitability.
Below, we take a closer look at the technicals on Dollar Tree’s monthly chart and point out important historical price levels to watch out for in the quarter ahead.
Potential Capitulation Selling
Dollar Tree shares broke down below a multi-year descending channel in August, with declines accelerating into September.
Importantly, the sharp downward move has occurred on the highest monthly trading volume since March 2009, potentially flagging capitulation selling in the stock.
Although the shares trade around 16% above their September low, the price remains below the closely watched 200-month moving average, indicating the bears remain in control of the action.
Looking ahead, investors should monitor several well-respected support and resistance levels on Dollar Tree’s chart that other market participants will likely be watching.
Key Support Areas to Monitor
The first lower level to watch sits around $70, a location on the chart just below Monday’s close where the shares may find support near the prominent June 2017 and March 2020 swing lows.
A breakdown below this level could instigate a drop to the $54 level, where the stock would likely attract buying interest from bargain hunters near a trendline connecting the June 2012 peak and prices positioned around the February 2014 trough.
Important Resistance Levels to Watch
An initial upswing in the stock’s price could see a rise to the $96 area, where the shares find a confluence of resistance from the descending channel’s lower trendline and a horizontal line joining a range of similar trading levels from June 2016 to October 2021.
Finally, reclaiming the above area may see the shares climb to $115, a region where investors could seek selling opportunities near three prior record highs on the chart that formed between January 2018 and April 2021.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.
As of the date this article was written, the author does not own any of the above securities.