Most of the stock market suffered in October -- but not DG shares
When most people think of Black Friday, they likely don't conjure up images of Dollar General Corp. (NYSE:DG). However, the discount retailer appeared on our radar for several reasons recently. To start, the stock tends to do well after Black Friday. In addition, DG shares just flashed a historical buy signal ahead of earnings next month.
Diving right in, DG has averaged a gain of 6.09% in the November-December period, since its inception in 2009. In fact, the stock has ended this period higher 88% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White, placing it among the best retail stocks to own during the holiday shopping season. What's more, the equity has averaged a gain of 2.21% during just Cyber Monday week (next week), ending this five-day stretch higher 89% of the time.
While most of the stock market was reeling in October, Dollar General shares enjoyed a 1.9% gain. Further, the equity touched an all-time high of $118.45 on Nov. 8. Since then, DG has pulled back, and is within one standard deviation of its 160-day moving average, after a lengthy stretch above this trendline.
There have been three similar signals in as many years, after which the security went on to average a one-month gain of 5.91%, and was higher 100% of the time. The next month also encompasses Dollar General's next earnings release, slated for Tuesday, Dec. 4, which could act as a catalyst higher.
Today, DG is up 0.7% to trade at $105.95. In light of this week's sell-off, the shares sport a 14-day Relative Strength Index (RSI) of 34 -- on the cusp of oversold territory, suggesting a short-term bounce may have been in the cards.
Should the retailer once again enjoy seasonal tailwinds, a shift in sentiment in the options pits could further bolster DG. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows traders have bought to open nearly three puts for every call on the stock in the past two weeks. The 10-day put/call volume ratio of 2.82 is in the 89th percentile of its annual range, pointing to a much healthier-than-usual appetite for bearish bets over bullish lately.