Retail stocks have slumped over the holiday season, but one name has bucked the trend.
Discount chain Dollar Tree is up 7 percent in the past month, the only stock in the S&P 500 retailing industry group solidly in the green. The XRT retail ETF, separate from the S&P 500 retailing subgroup, is down more than 11 percent since Nov. 27.
Todd Gordon, founder of TradingAnalysis.com, said its outperformance over the past few months has created an interesting technical setup.
“We have definitely been in a downtrend here — 2017 and 2018. Then of course in the massive bout of volatility that we’ve seen in the broader market, you’re seeing DLTR hang out, show a little bit of consolidation below this 200-day moving average,” Gordon said Thursday on CNBC’s “Trading Nation.”
Since a steep post-earnings drop at the end of August, Dollar Tree has traded in a tight range between $78 and $90. It now trades 9 percent higher than its Aug. 30 low.
“Does it have a chance to pop? Yes, it will have to overcome this downtrend over the last 18 to 24 months, pop above the 200-day moving average, and of course a supportive overall market would help,” Gordon added. “It’s got a lot to prove to us but there’s potential in this chart.”
Dollar Tree is just a 1 percent gain from hitting its 200-day moving average. It broke below that long-term trend line in April.
Erin Gibbs, portfolio manager at S&P Global Market Intelligence, is not as optimistic the chart can break out further.
“The reason why Dollar Tree is up in December is because it’s been tanking since January and basically it has just stabilized for the past couple months,” Gibbs said Thursday on “Trading Nation.”
While Dollar Tree is one of the best performers in the XRT ETF over the past month, it is down 19 percent for the year.
The company also has failed to meet Street estimates for the past year, Gibbs said.
“They have missed four out of the last four quarters on revenue estimates and they’ve missed three out of four on earnings,” she said. “Until this company can at least meet and start beating some estimates on some sort of sustainable basis, we really don’t recommend getting in.”
Dollar Tree is next set to report earnings on Feb. 27. Same-store sales are forecast to have contracted from a year earlier, though profit is expected to have risen.