Dollar General ( (DG) ) looks like it is still headed lower and buyers should stand aside -- the sales are going to get better.
On Aug. 26, we talked about how weak the charts had become on DG: "The worst thing about this daily chart of DG is that key support (prior resistance) in the $85 to $80 area was broken. The next chart support we see is in the $75 to $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."
With DG nearly all the way through the $75 to $68 support area, we need to freshen up our bearish views.
In this updated, one-year daily bar chart for DG, above, we can see the rapid fall from grace as prices have given back more than half of the rally from the November low. The slope of the 50-day moving average is bearish, and the 200-day average line has been broken. The On-Balance-Volume (OBV) line is pointed straight down, and tells us that selling has been aggressive -- investors want out of this stock. Momentum has not slowed down at all, which tells us that traders are not trying to pick a bottom.
In this three-year weekly chart of DG, above, we can see the carnage. DG is below the 40-week moving average line. The weekly OBV line has weakened in the past two months. The Moving Average Convergence Divergence (MACD) oscillator crossed to a liquidate-longs sell signal -- and is rapidly approaching the zero line for an outright sell or go-short signal. The next chart support, in my opinion, is the $65 to $60 area. Again, no rush to buy DG, as the sales are going to get better.
