Bloomberg News

Almost every rural town in 44 states has a retailer from which they buy almost any type of consumer goods; that store is a Dollar General Corp (DG) . To increase store traffic, the retailer is expanding its focus to include more upscale consumable and discretionary goods.

Dollar Tree Inc. (DLTR) operates discount variety stores located primarily in suburban areas. Their consumable items include candy, foods, health and beauty products, and frozen and refrigerated food. Household items include paper, plastics and chemical-based products. Variety items include toys, housewares, party supplies and greeting cards. For the holiday's, they feature seasonal items that are difficult to find in most other diversified retailers.

Dollar General has been outperforming Dollar Tree as rural economies are improving while folks in the suburbs are returning to retail malls to buy more upscale items.

From an equity money manager prospective, Dollar General pays a dividend, Dollar Tree does not. Some managers can only own stocks of companies that pay quarterly dividends. Dollar General's dividend is only 1.13% but at least it offers one.

Dollar General is trading around my annual pivot at $106.21 and the stock is up 14.5% year to date. The stock is in bull market territory 24.4% above its 2018 low of $85.54 set on March 9. The stock is also in correction territory,  10.1% below the high.

Dollar Tree is trading below my quarterly risky level of $90.56 with my monthly value level at $77.23. The stock is down 20.7% year to date and is in bear market territory 27.1% below its 2018 high of $116.65 on Jan. 31.

Daily Chart for Dollar General

Courtesy of MetaStock Xenith

The daily chart shows that Dollar General began 2018 above a "golden cross," visible since Sept. 6, 2017, when the stock closed at $75.29. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. Note how recent weakness has stayed above the 200-day SMA at $101.45. There are four horizontal lines and the lowest is my annual pivot at $106.21. The other three horizontal lines are my quarterly pivot at $107.94, my semiannual pivot at $109.46 and my monthly risky level at $113.37.

Weekly Chart for Dollar General

Courtesy of MetaStock Xenith

The weekly chart for Dollar General is negative, with the stock below its five-week modified moving average of $107.65. The stock is well above its 200-week simple moving average of $82.80, which is also the "reversion to the mean". This average was last tested during the week of Sept. 1, 2017 when the average was $70.75. The 12x3x3 weekly slow stochastic reading is projected to slip to 42.14 this week down from 49.24 on Dec. 7.

Given these charts and analysis, investors should buy weakness to the 200-day simple moving at $101.45 and reduce holdings on strength to my monthly risky level of $113.37.

Daily Chart for Dollar Tree

Courtesy of MetaStock Xenith

The daily chart for Dollar Tree shows that the stock has been below a "death cross" since May 16 when it closed at $95.29. A "death cross" occurs when the 50-day simple moving average falls below 200-day simple moving average and indicates that lower prices lie ahead. When this negative formation is in place, a trading strategy is to sell strength to the 200-day simple moving average, which was doable on May 24 at $96.24. The stock is currently below its 200-day simple moving average at $89.26 and below my quarterly and semiannual risky levels at $90.56 and $111.15, respectively, which are the horizontal lines. My monthly value level is below $77.23.

Weekly Chart for Dollar Tree

Courtesy of MetaStock Xenith

The weekly chart for Dollar Tree will be positive given a close this week above the five-week modified moving average of $84.42. The stock is just above its 200-week simple moving average of $83.51, which is also the "reversion to the mean." The 12x3x3 weekly slow stochastic reading is projected to rise to 48.83 this week up from 44.97 on Dec. 7.

Given these charts and analysis, investors should buy weakness to my monthly value level of $77.23 and reduce holdings on strength to my quarterly risky level at $90.56.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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