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November 29 Chart of the Day - Dollar Tree

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Dollar Tree (DLTR) shares are trading up this morning despite falling short of third-quarter earnings estimates on the top and bottom lines.

Trading at $118.73, well off its $177.19 all time high (ATH) set about a year and a half ago, we wanted to see from a price action technical analysis perspective why price might be trading higher given the earnings miss.

On the monthly chart we can see that price fell about 33% in the past four months falling from the $160 area down to $104.  So could this upswing be part of what some may call a "dead cat bounce?"


However, we prefer to consider the recent $104 low to be a normal technical analysis bull retracement to the 61.8% golden ratio when applying a swing Fibonacci.  In fact, price retreated to an area on the chart where there has been quite a bit of historical activity.  Very normal price action.

Down on the weekly chart we can see a change control zone roughly between $116 and $120.

Change control zones are one of the five price action tools we teach when charting anything.  By definition, they are an area that represents where neither the bulls nor bears are in charge.  Price can slash though the zone with seemingly reckless abandon, price can respect the top or bottom from outside it or within it.  Or, price can trade aimlessly sideways within it.  When price breaks away from the zone it can often get drawn back to it like a magnet. And in this case we see all of the above are true.

If price decides to break away from the zone to the upside then $130 could be a target. But if price decides to retreat and fall below the zone then price may want to revisit the $104 area.

So what's next? 

We don't make predictions...

Nobody knows for sure but using these 5 price action tools traders and investors can develop levels of interest in both directions.

  1. Support/Resistance
  2. Trend
  3. Fibonacci 
  4. Supply/Demand Zones,
  5. Change Control Zones

Take a look at the charts and let us know what you think.  

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