Dillard's Rally Didn't Last Long

 | Aug 15, 2017 | 11:10 AM EDT
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We haven't paid Dillard's (DDS) a visit in a while, and I haven't set foot in a Dillard's for several years. It was actually an anchor store for a mall I visited in Topeka, Kan. -- things certainly have changed!

DDS made a big rally from a low in May to a spike high at the end of July, but the rally has been quickly dashed. Does this mean Dillard's has to rebase again or did the rally get ahead of itself? Let's check out the charts and indicators.

In this daily bar chart of DDS, above, we can see a small saucer or rounded base pattern from March to early July. This small base may have been able to support a rally to $70 (taking the height of the base and projecting it upward), but the spike up to near $85 was probably unsustainable. Prices quickly crossed the rising 50-day moving average and also the now-rising 200-day moving average.

Prices were already heading back down when the 50-day average crossed above the 200-day line for a golden cross. The daily On-Balance-Volume (OBV) line turned up from a May low and peaked with prices in late July. The momentum study is not showing any bullish or bearish divergences yet.

In this weekly chart of DDS, above, the recent rally looks like other temporary spikes above the declining or flat 40-week moving average line. Volume has been heavier the past six months and the weekly OBV line has risen the past three months. The weekly Moving Average Convergence Divergence (MACD) oscillator looks like it is turning lower and maybe back below the zero line.

In this Point and Figure chart of DDS, above, we can see the quick run up and the equally fast decline. Prices broke nearby support on this chart and the chart projects a very bearish price target of $37, but support can be seen in the low $50s.

Bottom line: DDS could hold around $55 and try to stabilize, but we would not rule out a deeper decline into the $55-$50 area. A longer period of base building on DDS is probably required before I can become comfortable with the long side.

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