Can Dollar Tree Run to All-Time Highs on Earnings?

Dollar Tree is hitting new 52-week highs after reporting better-than-expected earnings. Are new all-time highs next?
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Dollar Tree  (DLTR) - Get Report has reacted well to earnings, with the stock up more than 10% on Tuesday.

The company reported third-quarter earnings, topping expectations and giving the stock a big jolt in the process.

The stock is realizing big gains  hitting new 52-week highs in the process - even as management withheld guidance

Still, the results were enough to impress investors, where revenue grew 7.5% year over year, same-store sales beat expectations by climbing 4% and as profit jumped more than 28%.

The reaction brings up a question of just how far the stock can run. Let’s look at the charts.

Trading Dollar Tree

Daily chart of Dollar Tree stock.

Daily chart of Dollar Tree stock.

Above is a look at the last five quarters of price action, which includes the prior four earnings reports before Tuesday’s action. Those are labeled with “EPS” and a purple arrow.

One will notice that even amid the post-earnings rallies, Dollar Tree has struggled to hold its gains.

Even though Dollar Tree is hitting new 52-week highs on the day, note that it’s still below its 2019 highs.

Further, the stock has only just now filled that prior earnings gap from last November. Or at least came extremely close, as it just missed tagging $110 in the session.

So what does all of this mean for Dollar Tree? It’s not necessarily a stock to short and there’s no guarantee that it will continue its disappointing post-earnings action. But it is a dose of reality tossed on the stock's bullish reaction.

I would love to see a close over $110. With shares are sitting right at the 78.6% retracement, it could go either way. Meaning, shares could either push up to and hopefully through $110 or they could pull back.

If Dollar Tree gives us a close above $110, it opens the door to a rally to the all-time high, up at $119.71. That may be possible if the overall market is holding up and if retail names catch a bid into the end of the year.

If the 78.6% retracement and $100 area hold as resistance, it’s not the end of the world. However, bulls will have to adjust their game plan, looking for a dip rather than a breakout.

In that case, I would love to see the $105 area hold as support. That’s roughly Tuesday’s low and the August high. Below that and $100 is in play, which was range resistance from June through November. Seeing it hold as support would be constructive on the long side.