Dollar General (DG) was in a weakened technical condition before its recent gap lower. Serious damage has been done on the charts and further declines are likely, in my opinion.
In this one-year daily bar chart of DG, above, we can act as the medical examiner and see what went wrong for the late patient. In the price chart, we can see DG broke below the 50-day simple moving average line in early August and rallies toward the line from below failed. Notice how the On-Balance-Volume (OBV) line peaked and turned down in late July. Investors became more aggressive sellers before the breakdown. Price momentum was also giving off warning signals. Notice the pattern of higher price highs for DG in June, July and then early August, but the momentum indicator made lower highs. Momentum was slowing as prices crept higher. This difference between price action and momentum is what is known as a bearish divergence. Momentum often peaks before a price peak.
The worst thing about this daily chart of DG is that key support (prior resistance) in the $85-$80 area was broken. The next chart support we see is in the $75-$68 area, but the farther you go back on a chart looking for support (or resistance), the less reliable it becomes. The market has a memory but old age can affect it.
On this weekly chart of DG, above, the gap from the daily chart disappears but the sharp decline is still there. Prices broke below the 40-week moving average line. The weekly OBV line has turned down. The weekly Moving Average Convergence Divergence (MACD) oscillator has crossed, generating a liquidate-longs sell signal. Prices could bounce before heading still lower but the important thing to remember is a new base for DG is going to take time.