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FDO Technicals Could Spell Profits

by Jon Lewis 07/01/09

Family Dollar Stores (FDO) is an intriguing stock and a potential earnings play to kick off the season right.

The company is seemingly in the right retail space -- deep discounter -- where many consumers have settled to cope with the shaky economy.

But is that enough?

Recent data shows consumers are saving rather than spending. Unemployment rolls are expanding, albeit at a slower rate, and the jobless rate is marching toward 10% and beyond. And the granddaddy of all discounters -- Wal-Mart (WMT) -- is down 14% so far in 2009, trailing the broader market by a wide margin. What's up with that?

FDO is struggling on the chart. Although up for the year, the shares sit 20% below their April high. The one technical positive, though, is the 200-day moving average, which has solidly supported the stock for the past three weeks. That's a huge consideration for a potential trade.

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