History Says This Retail Stock is Cheap

DG shares could be a steal at current levels

Dec 6, 2018 at 1:53 PM
facebook X logo linkedin


Dollar General Corp. (NYSE:DG) on Tuesday cut its full-year guidance, citing hurricane costs and potential tariff ramifications. As such, DG shares dropped 6.8% that day -- their worst session since May. However, the security is flashing a trio of historical buy signals, suggesting now may be time to pick up DG on sale.

The equity is back within one standard deviation of its 52-week moving average, after being north of this trendline at least 80% of the time over the past 20 weeks. There have been nine similar retreats to this moving average, after which DG went on to average a one-month gain of nearly 5%, and was higher 78% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

From a slightly shorter-term perspective, DG is also back within one standard deviation of its 160-day and 200-day moving averages. There have been four similar pullbacks to the 160-day, after which the equity was higher by 5.91%, on average, a month out. Retreats to the 200-day have preceded an even healthier average one-month gain of 9.51%. What's more, Dollar General stock was higher 100% of the time after pullbacks to both trendlines.

The security is now trading around $104.08, fractionally lower on the day. The stock seems to have found support in the $102 region, which also contained a retreat in mid-October, and is in the area of a 10% year-to-date gain for DG. Another 9.51% gain for the retail issue would place it around $114 to start the new year.

DG stock chart dec 6

Meanwhile, Dollar General's Schaeffer's put/call open interest ratio (SOIR) of 1.73 registers in the 92nd percentile of its annual range. This suggests near-term options traders are much more put-heavy than usual right now. Should DG extend its trend of bouncing off technical support, an unwinding of pessimism in the options pits could help propel the security's rebound.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI