I'm looking at opening a long position in Dollar General. It currently seems fairly valued and may have limited downside potential and has had a strong steady upside trend in the long term. My current thinking is that money is moving around between stocks to shake out some gains as money flows out of stocks that have done well through the pandemic and into beaten-down stocks. These small drops are creating good solid long term buying points though. I think despite a vaccine there is still a good reason to be in stocks that did well throughout the year because we aren't out of the woods yet thus they appear to be range bound and consolidating. I went in on HD last week with 15% of my portfolio and am looking at doing between 10-15% with DG as well depending on how Monday and Tuesday shape up. I am watching out for three possible scenarios.
The first is a bounce back up from the current price. The price action did dip below the close price of the previous two drops lately and has hung out there showing some weakness but held on Friday. This puts the price roughly along a May 2020 lower trend line and the 100 day SMA. Worth noting there was a three-day fight to hold the 50 SMA which ultimately failed. The first bounce back at this same price point was at the 50 SMA.
The second option is the price drops below my May 2020 lower trend line to the price of the heavier volume days of September when the gains attempted to stall out before bouncing back.
If neither of those happens and I have opened a position I will reduce my position in half around $201 hopefully finding support around $192 to buy back in. This is the third option. I see this less likely as Dollar type stores typically thrive in these economic environments.
My intent on the sell-side would be to start reducing by 1/3 at $221 which is the Dec 1st high. Reduce by another 1/3 which is the late October and Early November high. If all of that succeeds and the stock breaks out then hold until the average upper trend line starting in April 2020 around the $230 price point. If there is a break out it could be worth letting it ride with a $6 stop loss if the price crosses $226.
Feel free to let me know any thoughts people have on this.
The first is a bounce back up from the current price. The price action did dip below the close price of the previous two drops lately and has hung out there showing some weakness but held on Friday. This puts the price roughly along a May 2020 lower trend line and the 100 day SMA. Worth noting there was a three-day fight to hold the 50 SMA which ultimately failed. The first bounce back at this same price point was at the 50 SMA.
The second option is the price drops below my May 2020 lower trend line to the price of the heavier volume days of September when the gains attempted to stall out before bouncing back.
If neither of those happens and I have opened a position I will reduce my position in half around $201 hopefully finding support around $192 to buy back in. This is the third option. I see this less likely as Dollar type stores typically thrive in these economic environments.
My intent on the sell-side would be to start reducing by 1/3 at $221 which is the Dec 1st high. Reduce by another 1/3 which is the late October and Early November high. If all of that succeeds and the stock breaks out then hold until the average upper trend line starting in April 2020 around the $230 price point. If there is a break out it could be worth letting it ride with a $6 stop loss if the price crosses $226.
Feel free to let me know any thoughts people have on this.
Trade active:
$207.06 average share cost, current position is 6% of my portfolio