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Bitcoin Price AnalysisShortly after falling from its test of the low $4,000s, bitcoin managed to fin will goldfish fins grow back
Bitcoin Price Analysis
Shortly after falling from its test of the low $4,will goldfish fins grow back000s, bitcoin managed to find support in the mid $3,500s. This has proven to be a relevant level over the last few months, and finding support here would be a sign of relatively strong demand:
Figure_1 (2).png
Figure 1: BTC-USD, Daily Candles, Local Support
The high candle spread rejection following our test of the low $4,000s was an indication that we had strong levels of supply left in the market, but for the time being we are holding support. Looking into lower time frame charts, we see that we are currently riding on top of both the symmetrical triangle shown above and the prior trading range (TR) sitting just below us:
Figure_2 (12).png
Figure 2: BTC-USD, 4-Hour Charts, Retest of Trading Range
Often, we see extreme wicks that drop into prior trading ranges as a method to generate liquidity for large capital traders. When the markets have relatively low liquidity, the volatility tends to pick up as the order books tend to be thinner. Yesterday, the wick lined up perfectly with a dip into the reaccumulation TR sitting just below us. The test was on high volume and was immediately capitalized upon by the bulls.
Sometimes, when the market experiences prolonged consolidation patterns (like our symmetrical triangle), it will break out and retest the breakout zone to confirm bullish pressure is present. We are currently experiencing a potential retest of the symmetrical triangle breakout. If the retest holds, this could mean we’re in for a decent leg up in price, as the price target for this symmetrical triangle is a near $1,000 move (a 30% markup):
Figure_3 (11).png
Figure 3: BTC-USD, Daily Candles, Symmetrical Triangle Retest
To calculate the typical breakout target for a symmetrical triangle, we simply take the height of the base and project it to the point of breakout. In our case, it’s around $1,000 (technically, it’s about $1,100, but I’m being conservative since we are in a bear market).
Keep in mind that this just a setup, and our current failure to establish new highs could mean we need to push lower, test macro support and THEN retest the resistance overhead. However, if this level holds, the implications are fairly bullish.
In the event we continue upward, keep a close eye out for a close above our current $4,200 high. If we manage to close a new high, that will likely spark fresh buying interest since it would ultimately yield a break of our current bearish structure. Conversely, our failure to hold our current level would likely mean a return to the low $3,000s to test macro support.
Summary:
Our current rejection of the low $4,000s coincided with a retest of local support and a retest of our symmetrical triangle consolidation.
If we manage to hold support, we could be looking at a $1,000 move to the upside into the upper $4,000 area.
If we fail to hold support, we will likely see a retest of the $3,000 range to test the demand along macro support.
Story continues
Trading and investing in digital assets like bitcoin is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Inc related sites do not necessarily reflect the opinion of BTC Inc and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.
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As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.
The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.
The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.
In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.
Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.
As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.
Conclusion
In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.
Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?
Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.
Disclosure: None
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