On February 7, we mentioned that the stock price of Dillard's Inc (NYSE:DDS) created a series of lower highs/lows. We suggested that the structurally lower highs was an indication of a confirmed downtrend and that the rally was becoming exhausted as it neared the resistance of the descending trendline. We predicted that traders would likely protect their positions by setting a stop-loss order above the high of $20.66 and that they would set their short-term target near the January low.
As you can see from the chart below, the stock did indeed reach the January low. The closing price from February 7th is currently 16% above the current levels and it will be interesting to see if the bulls can send the price toward the upper trendline again. Technically speaking, it is very interesting to see how the stock found support at the January low and it could be used to suggest that the stock has found a bottom. We'll now watch for a move toward the upper trendline and would expect bullish traders to protect their positions by setting a stop-loss below the recent low (shown by the red line).
For more, see Channeling: Charting A Path To Success