Dollar Tree, Inc. (NASDAQ: DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise at the fixed price of $1.00. The company’s stores provide consumable merchandise, including candy and food, and health and beauty care products; and household consumables, such as paper, plastics, household chemicals, and frozen and refrigerated food. Its stores also offer various merchandise comprising toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods consisting of Easter, Halloween, and Christmas merchandise. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. As of October 27, 2012, it operated 4,630 stores in 48 states and 5 Canadian Provinces. The company was founded in 1986 and is based in Chesapeake, Virginia.

To review Dollar Tree’s stock, please take a look at the 1-year chart of DLTR (Dollar Tree, Inc.) below with my added notations:

1-year chart of DLTR (Dollar Tree, Inc.)

DLTR has been in a persistent downtrend since June of last year. During that time the stock has also formed an important trend line of resistance (red). Always remember, any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. DLTR has also created a line in the sand with its $38 support (green).

The Tale of the Tape: DLTR is currently stuck between a down trending resistance and a $38 support. A break below $38 would provide and opportunity to short the stock, while a break above resistance should mean higher prices. A long trade could be made on a pullback to $38, but overall the stock appears weak.

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!

Good luck!

Christian Tharp, CMT