Dollar General Corp (NYSE:DG) stock is down 5.3% to trade at $107.07, extending its year-to-date deficit to 20%. Shares are trading at their lowest level since Dec. 4, however, the pullback has the discount retailer testing a historically bullish trendline.
According to Schaeffer’s Senior Quantitative Analyst Rocky White, shares are within 0.75 of the 320-day moving average’s 20-day average true range (ATR), after remaining above it 80% of the time in the past two weeks and in 80% of the last 42 trading sessions. This signal has occurred nine times in the last 10 years, after which DG was higher one month later in 78% of the time, averaging a 6.6% win.
A move of similar magnitude would nearly fill the stock’s 7.7% monthly drawdown. Longer term, the shares are up 16.4% in the last 12 months. Keep an eye on DG’s 14-Day Relative Strength Index (RSI) of 28, on the cusp of “oversold” territory.
With earnings not until June, options are affordably priced. DG’s Schaeffer’s Volatility Index (SVI) of 36% that sits higher than 22% of readings from the past year. In other words, near-term option traders are now pricing in low volatility expectations.
