NEW YORK (TheStreet) -- Shares of discount retailers Dollar General (DG) and Dollar Tree (DLTR) set all-time highs this week. Each has traded as a momentum stock on speculation that it might emerge the winner in their battle to acquire smaller rival Family Dollar (FDO) .
Shares of all three discount retailers could be affected Thursday morning when Dollar Tree plans to report quarterly earnings. (On average, analysts expect the company to earn 56 cents a share.)
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None of the three companies has beaten earnings estimates in recent quarters, so these stocks may have outrun their upside potential.
Family Dollar has agreed to be acquired by Dollar Tree, although the acquisition still awaits approval by federal regulators and Family Dollar's shareholders. Family Dollar just postponed its shareholder vote to Dec. 23 from Dec. 11. Meanwhile, Dollar General has pushed ahead with a hostile offer valued higher than Dollar Tree's deal.
Family Dollar has rejected Dollar General's bid multiple times, saying that antitrust regulations might imperil a transaction. Dollar General's stock was slumping Wednesday morning after the New York Post reported the company would have to divest as many as 4,000 of its own stores in order to get a deal approved by the Federal Trade Commission.
Amid all the deal drama, here's how to trade Dollar General, Family Dollar and Dollar Tree.
Dollar General ($66.17) set an all-time high at $66.21 on Tuesday. Investors should enter a good-'til-canceled limit order to sell strength to a key technical level at $69.60 and employ a sell-stop below its key weekly moving average at $63.33, keeping in mind that this average will rise each week.
Family Dollar ($78.85) set an all-time high at $80.97 on Sept. 2. Investors should enter a good-'til-canceled limit order to sell strength to a key technical level at $84.85. If you are concerned that the company's purchase by Dollar Tree won't go through, you should book profits now. This discounter missed earnings estimates four quarters in a row.
Dollar Tree ($61.99) set an all-time high at $62.72 on Monday, and the earnings bar is high as the company missed analysts estimates with two of the last three quarterly earnings reports. Investors should enter a good-'til-canceled limit order to sell strength to a key technical level at $68.30 and employ a sell-stop below its key weekly moving average at $59.57, keeping in mind that this average will rise each week.