DG breaks below key technical support level
Dollar General Corporation (DG) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, DG finished the month -0.06% lower at 190.40 after losing $0.92 (-0.48%) today, notably underperforming the S&P 500 (0.77%). Closing within the prior day's range, prices failed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (DG as at Jul 31, 2020):
Friday's trading range has been $3.99 (2.08%), that's above the last trading month's daily average range of $3.46. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for DG.
In spite of a strong opening the share closed below the prior day's open and close, forming a bearish Engulfing Candle.
After trading as low as 187.76 during the day, the stock found support at the 50-day moving average at 188.84. The last time this happened on July 14th, DG actually lost -0.16% on the following trading day. Prices broke below the key technical support level at 191.15 (now R1), which is likely to act as resistance going forward. After having been unable to move above 192.08 in the previous session, Dollar General ran into sellers again around the same price level today, missing to move higher than 191.75.
The trend is clearly bullish, showing an intact uptrend in the short, medium and long-term.
Buying could accelerate should prices move above the close-by swing high at 192.43 where further buy stops might get triggered. As prices are trading close to July's low at 185.54, downside momentum could speed up should the market mark new lows for the month.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "2 Consecutive Lower Closes" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for Dollar General. Out of 328 times, DG closed higher 60.37% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 60.06% with an average market move of 1.18%.