Dollar Tree, Inc. (NASDAQ:DLTR) is trading sideways on Tuesday. It rallied by more than 4%yesterday after the company reported its earnings. The shares are getting close to a level that may have resistance. This could put a ceiling over the price. That is why Dollar Tree is the Stock of the Day.
‘Sell at former tops’ is an old Wall Street adage. It refers to how stocks tend to encounter resistance when they reach a level that has previously been a peak.
There can be resistance at a price that had previously been resistance because of remorseful or regretful buyers.
These are people who purchased shares at the previous top who have regretted doing so ever since. They have a losing position after the price drops.
When the shares climb back to the peak level, they have a chance to exit their positions at breakeven. They place sell orders and if there are enough of them, it will create resistance at the level again.
Dollar Tree Breaks Short-Term Resistance
Yesterday, there was resistance around $133.50.
Buyers overpowered sellers, and the shares rallied. But they are getting close to another level that may provide resistance.
As you can see in the chart, Dollar Tree reached an all-time high of around $141.50 in January. There are traders and investors who bought shares there and have regretted it ever since.
If the stock returns to this level, they will place sell orders to finally exit their positions without losing money. If there is a large enough quantity of these orders, it can form resistance at the former high.
Some old trading expressions may not seem to make sense.
But some are based on market principles. ‘Sell at former’ tops is one of them.
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