Dollar Stores Look Ripe for a Bounce

The S&P 500 Index has completed three six-month rally cycles since October 2011, and may be in the first stages of a third sideways consolidation phase. But the dollar retail group is one sector that disconnected from this broader cycle about six months ago, and has underperformed ever since. While this lag has continued since the start of 2013, several stocks in the space appear to be completing consolidation processes of their own, and are now positioned to move higher.

S&P 500 Source: StockCharts.com View Chart » View in New Window »

Dollar General (DG) dropped below its 50-day moving average in July 2011. It then failed to retake the average the following September, and proceeded to move into its lower Bollinger band range and began trending under a well-defined downtrend line. After forming a strong hammer candle in December, the stock has attempted to stabilize, moving sideways and forming a base from which it can challenge the downtrend line, which is currently being reinforced by a horizontal resistance line in the $47 area....342 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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