Last October this stock jumped when billionaire Carl Icahn announced he established a large stake in this company.
Recently this stock soared again when the activist firm, Starboard Value, disclosed that it had accumulated a position.
In August 2018 Dollar Tree (DLTR) plunged when it announced lower than expected earnings.
However, since then it stabilized and then rallied as the general market suffered through a major correction.
This suggest that the two activist investors mentioned above aren’t the only ones that like this stock.
I would not buy a stock simply because a smart activist fund is in it, but if the market sets up a bullish pattern like is has here, then it gets interesting.
So my interest in DLTR is its current flag pattern on the daily chart.
The pattern also happens to be sitting at a very pivotal price level. The top of the flag is just below $100 which has been significant resistance going back as far as 2016.
The low of the flag is just below $95 which is an area that should serve as support.
Friday, DLTR broke out and closed higher than the flag’s trend line. This suggest the next up move is beginning.
The best stop would be under the flag’s low of $92.90, but tighter stops for a more active trader would include under 93.90 or under $94.90.
The idea here is to enter before it gets too close to the $100 level since that could be a volatile area.
So betting that the flag is going to hold up means any entry under $97.50 can offer a good reward to risk trade.
If it breaks out over $100 then $105-$108 are areas to take some profits and move to a no loss stop.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation