close icon

Dollar General Stock Bulls are Looking for Trouble

As a general merchandise discount retailer, Dollar General was among the handful of businesses that actually benefited from the pandemic. People piled on necessities preparing for what looked like the end of the world for a while.

As a result, sales at Dollar General surged in the midst of the crisis. While its stock price initially reflected the general panic, it quickly rebounded and is now at a new all-time high. In fact, the stock is up by nearly 53% from its mid-March bottom of $125 a share.

Can investors rely on the uptrend to continue or should they prepare for a reversal? The company’s EPS have been growing at 11% on average for the past five years. However, its P/E ratio stands at ~25 suggesting strong overvaluation. To back that conclusion up, let’s take a look at Dollar General from another angle.

Dollar General stock poised for a bearish Elliott Wave reversal

The weekly chart above puts the stock’s rally since 2010 into Elliott Wave perspective. Investors have every reason to love Dollar General, as its stock price multiplied by almost ten in a little over 10 years. Unfortunately, no trend lasts forever.

Dollar General Bears to Show Up Soon?

The chart reveals a textbook five-wave impulse, labeled 1-2-3-4-5, where the five sub-waves of wave 1 are also visible. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. If this count is correct, we can expect a notable decline to erase all of wave 5’s gains.

2020 is shaping up as another very strong year for Dollar General the company. As for DG the stock, the second half of the year might be disappointing. A bearish reversal followed by a decline to the $120 area seem to be lurking ahead.

Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

General Mills Bearish Elliott Wave Cycle Spells Trouble

The last time we wrote about General Mills stock was over a year and a half ago. Following a bullish reversal Elliott Wave analysis helped us correctly predict in late-December 2018, the stock was trading above $51 a share in late-March 2019. It was a 33% recovery, whose structure, however, didn’t look quite as anticipated.…

Read More »

Fortinet Is Strong, but The Stock Can Slide 40% Anyway

Fortinet Inc. provides cybersecurity solutions to large and small businesses and enterprises. The company went public on the NASDAQ exchange in late-2009. Great timing, as it allowed it to enjoy the phenomenal post-crisis bull market. In fact, by July 2020, FTNT stock was up 794% since its IPO, easily beating the S&P 500’s return over…

Read More »

NIU Stock, Down 18% This Week, Can Fall Further

E-scooters have been all the rage in the past couple of years. Much friendlier to the environment and often more convenient as an urban transportation option than cars, electric scooters were quick to gain popularity. Niu Technologies, a Chinese manufacturer, has been bearing the fruits of this trend. The company’s ADS trade on the NASDAQ…

Read More »

Barry Callebaut Can Drop 25% as Fourth Wave Unfolds

Barry Callebaut AG is one of the largest cocoa processors and chocolate manufacturers in the world. Formed by the 1996 merger of Callebaut and Cacao Barry, the company produces over two million tonnes of cocoa and chocolate per year. Barry Callebaut went public on the SIX Swiss Exchange in 1998 and has been quite rewarding to investors ever since.…

Read More »

Elliott Wave Correction to Drag DraftKings Down 50%

DraftKings, the popular digital sports entertainment and gaming company, went public in April, 2020. It wasn’t a normal IPO, though. The company instead merged with a blank-check company, Diamond Eagle Acquisition Corp., which listed in 2019 at $10 a share. Less than six full months later now, DKNG trades near $57 a share, down from…

Read More »

Alteryx: Can We Trust the Pre-Market Enthusiasm?

Alteryx Inc., a self-service data analytics software provider, saw its shares soar 28% in pre-market trading today. The surge was caused by the better-than-expected Q3 revenue guidance the company issued yesterday. Apparently, the news that AYX was going to make $13-15 million more in quarterly sales than anticipated was enough for investors to boost its…

Read More »

LKQ Shows How An Elliott Wave Cycle Should Look

LKQ Corporation is an auto parts provider, founded in 1998 and headquartered in Chicago, IL. Investors who bought LKQ stock at the IPO price in 2003 and held until 2018 would have multiplied their money by almost 25. On the other hand, those who bought in January 2018 are still under water as the stock…

Read More »

More analyses