Even After a Big Decline, Dillard's Continues to Search for a Bottom

 | Mar 15, 2017 | 12:10 PM EDT
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Little Rock, Ark.-based Dillard's  (DDS) continues to search for a bottom without much success. Dillard's only has stores in about half of the 50 states and I've only stepped foot in one in Topeka, Kan. a number of years ago. I am not a retail analyst but I left that one visit to Dillard's disappointed. Long before the internet and Amazon (AMZN) changed traditional retail shopping I got the sense that Dillard's had problems.

Looking at the updated charts of DDS this morning I get the same feeling. The stock made a long climb from its late 2008/early 2009 nadir to its 2015 zenith but in two years it has lost more than half its value and a bottom has not been reached. The price action is disappointing.

In this one-year daily bar chart of DDS, above, we can see that prices were in a sideways trading range from May to February. Buyers of DDS were willing to step up around the $55 level but ran out of bullish enthusiasm in the $70-$75 area. Unfortunately, at the end of February the bulls lost conviction. Prices broke below $55 and the volume of trading soared sharply as longs dumped positions. The $55 level used to be support, but now it will likely act as resistance.

The moving averages pointed the way down and we can see a bearish death cross in early February as the 50-day moving average line fell below the 200-day moving average line. The On-Balance-Volume (OBV) line from May to February did not show much sustained buying so the break of support at $55 is not that much of a surprise. The momentum study in the lower panel is not giving us a strong bullish divergence, unfortunately.

This three-year weekly chart of DDS, above, shows that prices are below the declining 40-week moving average line. The weekly OBV line is not far from making a new low for the move down -- a bearish clue. The weekly Moving Average Convergence Divergence (MACD) oscillator has been in a bearish mode the past two months.

Bottom line: With DDS's decline this month to new lows, the $55 to $60 area is likely to reverse roles and become resistance.

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