Shares got annihilated, plunging 22% after falling 10% the week prior.<\/p>\n
Yet, somehow the stock found support at $64 a share and has been trending upward ever since.<\/p>\n
So, why am I willing to step in front of this dead cat bounce?<\/p>\n
For starters, it was one of the few stocks down on Thursday when everything else was ripping. In my eyes, this is a sign of relative weakness.<\/p>\n
Second, the stock formed bearish shelves on two different timeframes.<\/p>\n
Since you may not be familiar with a bearish shelf, let me explain what I\u2019m talking about.<\/p>\n
A bearish shelf is basically a bearish TPS setup with a tightening range.<\/p>\n
It forms from a downward thrust that moves into a narrowing chart pattern.<\/p>\n
This 30-minute chart illustrates what it looked like for Dollar Tree.<\/p>\n
![\"\"](\"https:\/\/lh7-rt.googleusercontent.com\/docsz\/AD_4nXfcGKjx4itgB4ctSW0SgAYQr1jB_PzkyCuEuxO_aCKxTGQGlXu0E-2BAWKmzFX78nICElXcOIKukcehC24v_7V_6RJw0ngUNTZFBa3AhLclxfPJ0vvGJqBFSyvnQn0AYt1Z71aTKN2LuG486UJeHBdy0Mgo?key=-G5PvbKz53Wkvxpv_FVO3A\")
Now, you might be asking yourself, why isn\u2019t this a bullish pattern? After all, the stock was clearly in an uptrend.<\/p>\n
Here\u2019s my thinking.<\/p>\n
This stock opened at new (recent) highs. It then fell and started closing candles and consolidating below the bottom end of the previous bullish pattern.<\/p>\n
Had price managed to stay above $74.50 or so, then I might not have chosen to take a bearish trade here.<\/p>\n
On top of that, the momentum is very negative, as you can see in the histogram at the bottom.<\/p>\n
Now, I want to zoom out and show you what the 130-minute chart looks like.<\/p>\n
![\"\"](\"https:\/\/lh7-rt.googleusercontent.com\/docsz\/AD_4nXdV_8og4xXMTODjGHJ7IQbcQZrNjHGRbVjKd3JuWBNcizPFiCAVUV1X4e6dQhUrppk7zqSehWzCJzen5TGcCsGs35nXke-qC1t05ueRZugOezo5ta2WvBXYyjoklhC2pBn4NRROiN-0BNcI-xQrejNhDVE?key=-G5PvbKz53Wkvxpv_FVO3A\")