Dollar General (DG - Get Report) is not having the same reaction to earnings as Dollar Tree (DLTR - Get Report) . The latter jumped when it reported fourth-quarter earnings, but after closing lower by 7.5% on Thursday, Dollar General can't say the same thing.
Despite the company tumbling on an earnings miss, though, the charts are still OK. They're not great, mind you, but the stock is certainly holding up better than most would be on a 10% decline, which Dollar General suffered through earlier in the day.
Let's not waste any time and get into the charts here.
Trading Dollar General Stock
I do not generally prefer to use a daily chart for a multi-year look, but Dollar General stock has had such a solid trend, it was the best way to zoom out on the bigger picture. Shares were trading at new 52-week highs before the earnings report, likely on optimism from the post-earnings reaction from Dollar Tree.
In a way, then, this was a bit of a sell-the-news event, particularly with a somewhat disappointing result. In any regard, shares are coming into uptrend support (blue line), while just below is the 200-day moving average at $107. While this moving average has been solid support over the last 18 months, it's not perfect. DG stock has tended to break through the 200-day for a few sessions before rebounding. If that's the case, Dollar General stock could break down to the $102 to $105 area before recovering.
It helps that the 38.2% Fibonacci retracement for the 52-week range is just above $107 as well. A great scenario for bulls would be a further (albeit smaller) decline on Friday and perhaps into Monday, while holding this $107-ish area and/or breaking slightly below this level and quickly recovering it.
Should the 200-day and uptrend support fail to buoy Dollar General stock -- after all, all uptrends come to an end -- I would watch the $97.50 to $100 level. At this point, DG stock would be down more than 15% from its recent highs and present bulls with a reasonable risk/reward.
First thing's first, though, let's watch the 200-day over the next few sessions. That will give investors the necessary clues moving forward. Dollar General missing earnings estimates of $1.89 per share by 5 cents and reporting disappointing margins isn't helping matters. Neither is the company's guidance, calling for roughly $27.4 billion (at its midpoint) in full-year sales vs. expectations for $27.5 billion, while forecasting earnings of $6.40 per share (again at the midpoint of management's outlook) vs. expectations for $6.65 per share. A 10% dividend bump is nice, though.
Let's see how the 200-day holds up.
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