In a June 3 update on Dollar General (DG) we said, "DG looks like it is headed to $100 in the intermediate-term, and it will take a decline below $85 to change the picture from bullish to cautious." Because retail has become such a fast-moving industry (at least when it comes to the stock price), we thought a quick "price check" was worthwhile.
In this daily chart, above, we can see that DG has rallied higher into the low $90s. Prices are above the rising 50-day simple moving average line and the slower to react 200-day average. But, volume and the On-Balance-Volume (OBV) line are flat and not leading DG higher. The 12-day momentum study in the lower panel is slowing.
In this weekly chart of DG, above, we can now make an observation that we missed last time. There have been three rallies up since November of 2015. The first rally was from $60 to $75 for $15. The second was from $75 to $87 for $12. The third rally only carried $10, from $82 to $92. This is a long way of saying that the rallies have been s-l-o-w-i-n-g. When a rally slows, it doesn't mean we should rush out and sell the stock. It just means we should pay closer attention. DG is still in an uptrend, and may still reach our $100 target, but I would raise stop-loss protection to $87 from below $85.
