Dollar Tree (DLTR) bottomed out in the fourth quarter of 2015 and has made a good move to the upside. They say that they never ring a bell at the top, but maybe the bells are ringing on Dollar Tree.
In this daily chart of DLTR, above, we can see that it closed near the low of the day Thursday after making a new high for the move up. Not just a new high for the move up but a new all-time high. And not just a new all-time high, but a tenfold increase from its 2008 nadir! If you bought the stock back in the dark days of 2008-2009, you have outperformed big time. There can be a big reluctance to sell your big winner, but that is exactly what I am suggesting.
In the chart above look closely at the price action the past three months. In the last move up from June the volume was been flat and not expanding. The On-Balance-Volume (OBV) line has been pretty flat and momentum has been weakening, giving us a bearish divergence. DLTR has spent five or more weeks around the $95 level and a close below $95 will put a lot of recent longs at a loss.
In this weekly chart of DLTR, above, we have bullish and bearish signals. Yes prices are above the rising 40-week moving average line and the weekly OBV line made new highs, but the MACD oscillator is narrowing toward a liquidate-longs sell signal. A lower close today (Friday) could give us a weekly key reversal on the chart.
It is easier to identify a top when prices have been rolling over for months and you can see a series of rally failures, but a top can also be just a point in time. This can be hard to identify and when you are wrong it can make you look like the boy who cried wolf. But the best days for DLTR may be behind us. A close below $95 could precipitate a decline to $85 in the weeks ahead.
