85.86 +0.82 (+0.95%) Sell

DLTR does a dead cat bounce, it's still too early to buy into it

13 min read

DLTR was among the best performers today. On a longer term basis, investors in DOLLAR TREE INC made -0.04% per day. Friday's performance of +0.95% was a significant outperformance compared to it's daily average.

[Themes containing DLTR]

DLTR showed a flat trend over the last 3 months. During this period DLTR returned +0.42% and saw a maximum drawdown of -7.78%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in DLTR till volatility reduces and a clear trend emerges.


DLTR has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 10 days, DLTR underperformed the SP500 index on 49% days. Which indicates that on days DLTR underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months DLTR delivered losses on 53% days. However, it still managed to end this period in a profit. It's best return during this period (of +6.83%) was on Tuesday, 16 Oct, 2018. While it's worst loss in the same period (of -5.6%) was on Thursday, 11 Oct, 2018. There was initially a bearish trend during this period which started on 25 Sep, 2018 and went on till 28 Sep, 2018. The trend delivered -4.84% losses to investors. This was followed by a bullish trend that started on 1 Nov, 2018 and ended on 8 Nov, 2018. This bullish trend delivered +4.14% to investors.

On monthly basis, DLTR delivered profits in more months over the last year, than losses. DLTR delivered profits less regularly than SP500 index. DLTR was also a more risky investment than SP500 index as it's worst month in the last year, May 2018, returned -13.87% compared to -7.28% returned by SP500 index in Oct 2018. DLTR had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both DLTR and SP500 index significantly outperform during months when quarterly/annual results are announced.

"Watch your finances like a hawk.

DLTR is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in DLTR's volatility from 18 Sep, 2018 to 16 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that DLTR has significant positive skewness in it's return distribution. This indicates that investors can expect DLTR to recover from drawdowns quickly. Which makes DLTR a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in DLTR derivatives at this moment can consider 'Long Straddle' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than DLTR. Therefore, SP500 must receive a lower allocation than DLTR in your portfolio. DLTR usually has shorter drawdown period than the SP500 index.

On a general note (since you are interested in DLTR), three small cap instruments that deserve special mention are EHC, ZBRA and PTC. They have all outperformed the market and must be closely watched for investment opportunities.

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