Technical Analysis: Dollar General Corp.

Dollar General Corp.

Often a rare technical pattern yet impactful to say the least, this cup and handle formation with the lower high located on the left hand side of the chart has showcased how lethal it can be to either side of optimism or pessimism. Up to the point where the breakdown occurred, this stock was following a upward trend in an orderly fashion with a considerable amount of upside potential.

The combination of the 8 & 21 day moving average appears to have been a good indicator of direction of the trend with the current reading marking a bearish sentiment. The price action at $80 is what interests me the most and subsequently forms the line of polarity as seen on previous occasions.

On the first attempt to surge higher the buyers lacked conviction which resulted in the price drifting lower however the second attempt left no one uncertain of the direction of the trend. It's also important to note that the price found support along this line a number of times before the swift move downwards encroached on traders bullism.

In saying this, if we are to witness a comeback from the bulls from these levels we'll need to see a solid candle that engulfs the $80 level but as things stand this looks unlikely for a few reasons.

Price is meeting opposition against the 21 day moving average at the same point of lateral resistance. This confluence will definitely favour the sellers together with the overbought reading on the stochastic.