Seasonality Says Dollar Tree Stock Set for Sharp Reversal

Dollar Tree has performed great in November in recent years

Oct 31, 2019 at 2:39 PM
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Dollar Tree, Inc. (NASDAQ:DLTR) has been getting hammered since its record high of $119.71 on Oct. 22, today down another 2% at $109.84, putting it on pace for a seventh straight loss -- what would be its longest losing streak since 2014. However, historical data says a quick turnaround is ahead, as DLTR stock has been positive in November in nine of the past 10 years, and has averaged a gain of 7.78%.

But interestingly, put buying has picked up at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), with the 10-day put/call volume ratio of 1.01 showing put buying actually surpassed call buying. This reading ranks in the 83rd annual percentile, so such behavior is not common.

Still, peak open interest in the front-month November series is at the 105-strike call, and in second place is the 115-strike call. The most heavily populated put in the series, meanwhile, is the 110-strike put.

Looking at Dollar Tree more broadly, there's still potential for more bullish analyst attention, since the shares sport a year-over-year lead of 30% and yet seven of the 16 covering analysts still have just "hold ratings in place. As such, more firms could follow the lead of RBC, which raised its price target on the stock to $127 from $113 on Monday.


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