We penned a bearish report on Aug. 26 about Dollar Tree (DLTR) .
"In recent days, Dollar Tree was hit with a rapid price markdown, not by a store manager but in the marketplace for its shares. Prices are down sharply from their zenith earlier this month, but the carnage is probably not over."
Indeed, the carnage is not over. When will the bears let prices bounce?
In this daily chart of DLTR, above, going back 12 months we can see that DLTR has broken down below the 50-day moving average line and its slope is now negative (bearish). Prices have also broken below the 200-day moving average line and it looks like its slope is starting to peak. The On-Balance-Volume (OBV) line has been weakening for the past five weeks and tells us that traders and investors are aggressive sellers with volume heavier on down days. In the bottom panel is the 12-day momentum indicator and it has yet to show us a bullish divergence when compared to the price action.
In this three-year weekly chart, above, of DLTR we see that prices are below the 40-week moving average line. The weekly OBV line is weakening and the trend-following Moving Average Convergence Divergence (MACD) oscillator is signaled a liquidate longs sell signal. The chart shows there is a band of former resistance in the $80 to $75 area and I would look for DLTR to test this area in the days ahead. This zone could hold but if DLTR slips to $76 or more than halfway through the support area we are likely to see the support give way. Below $75 and DLTR is at risk to decline to around $65.