Inflation was pushing consumers toward discount retailers
In the uncertain currents of an inflation-weary economy, two companies — one making the machinery of industry, the other selling the necessities of daily life at a discount — have emerged as quiet outperformers, drawing the attention of those who read markets the way navigators once read stars. Regal Rexnord and Dollar General, each shaped by different forces, have climbed to technical thresholds where history suggests momentum may soon become movement. The moment asks not whether these companies are strong, but whether the market is ready to confirm what their charts have already begun to say.
- Both stocks have hit new relative strength highs at a time when most of the market is struggling to find footing, signaling that something meaningful is separating them from the crowd.
- Regal Rexnord's cup-with-handle formation and a RS Rating that surged from 36 to 92 in just three months suggest a company quietly building pressure beneath the surface.
- Dollar General is being carried by a structural shift in consumer behavior — inflation is driving shoppers away from premium retailers and toward discount aisles, and the numbers are bearing that out.
- Both stocks are holding above key moving averages, but neither has yet broken through its identified buy point — the confirmation investors are waiting for before committing.
- The technical setups are clear and historically favorable, but the market itself remains the final arbiter of whether these patterns resolve upward or stall at the threshold.
In early October, two stocks drew the focus of technical analysts: Regal Rexnord, an electrical equipment manufacturer, and Dollar General, the discount retail giant. Both had just reached new highs on their relative strength ratings and were hovering near buy points — the price levels where a potential breakout might begin.
Regal Rexnord had formed a cup-with-handle pattern just below the 151 buy point, a formation chartists associate with sharp upward moves. Its relative strength line had hit a new high against the S&P 500, and its RS Rating had climbed from 36 to 92 over three months. With a composite rating of 97 and an EPS rating of 84, the company was outpacing the vast majority of publicly traded peers. Second-quarter earnings grew 3 percent, while revenue surged 52 percent — a slight cooling from the prior quarter but still formidable.
Dollar General's story was shaped as much by economics as by charts. Inflation had been pushing consumers toward discount retailers, and the company was capturing that migration. Its second-quarter earnings per share rose 10.8 percent to $2.98, beating forecasts, while revenue reached $9.425 billion and same-store sales climbed 4.6 percent. The stock had formed three consecutive cup-with-handle patterns over the prior year and was building a flat base with a buy point of 259.75, holding support above its key moving averages despite some mid-week softness.
For investors, the question was not whether these companies had demonstrated strength — they had — but whether each would push through its buy point and turn technical promise into confirmed momentum.
Two stocks caught the attention of technical analysts in early October: Regal Rexnord, an electrical equipment manufacturer, and Dollar General, the discount retailer. Both had just hit new highs on their relative strength ratings—a measure of how well they were performing compared to the broader market—and both were positioned near what traders call buy points, the price levels where a stock might be ready to break out and climb further.
Regal Rexnord had formed what chartists call a cup-with-handle pattern, a bullish technical formation that often precedes a sharp move upward. The stock was trading just shy of 151, its identified buy point. More tellingly, its relative strength line—which tracks performance against the S&P 500—had just hit a new high, a signal that the company was pulling away from the market. The RS Rating had climbed steadily from 36 three months earlier to 92 by early October. The company's composite rating stood at 97, and its earnings per share rating of 84 meant its recent profit growth was outpacing 84 percent of all publicly traded companies. In the second quarter, the company had posted a 3 percent earnings gain, though revenue growth of 52 percent had cooled from the prior quarter's 60 percent. Among electrical equipment makers, Regal Rexnord ranked third in its industry group.
Dollar General's story was different but equally compelling. The discount retailer had also hit a new relative strength high, with its RS Rating climbing to 92. It was forming a flat base with a buy point of 259.75, and notably, it had completed three consecutive cup-with-handle patterns over the previous year—a sign of consistent strength. The stock had found support above its 50-day moving average on Monday before slipping back on Tuesday, though it still held support from its 21-day and 200-day lines.
What made Dollar General particularly interesting was the backdrop. Inflation had been pushing consumers toward discount retailers as a way to cut costs. Shoppers were abandoning pricier grocery stores, department stores, and even online retailers in favor of places where they could stretch their dollars further. This shift was showing up in the numbers. In the second quarter, Dollar General's earnings per share had risen 10.8 percent to $2.98, beating analyst expectations. Revenue had climbed to $9.425 billion, also ahead of forecasts. Same-store sales had increased 4.6 percent year over year, and inventory per store had jumped 25.1 percent to a total of $6.9 billion across the chain. Despite these strong results, Dollar General ranked fourth in the discount retailer industry group, behind BJ's Wholesale, Grocery Outlet, and Dollar Tree.
For investors watching these two stocks, the technical setup was clear. Both had shown they could outperform the market. Both had formed patterns that historically precede breakouts. Both were holding support at key moving averages. The question was whether they would break through their identified buy points and confirm the strength their relative strength lines were already suggesting.
Citações Notáveis
Consumers have sought discount stores to cut costs charged by upscale grocery stores, department stores and even online retailers.— Market analysis
A Conversa do Hearth Outra perspectiva sobre a história
Why does it matter that these two stocks hit new relative strength highs at the same time?
It's not really about timing so much as it is about confirmation. When a stock hits a new high on its relative strength line, it's telling you something the price chart alone might not—that the company is genuinely pulling away from the market, not just riding a broader rally.
And the buy points—are those guarantees?
No. They're more like thresholds. Historically, when a stock breaks above a well-formed pattern at a certain price, it tends to continue moving up. But the market doesn't follow rules. The buy point is where you'd watch most carefully, where the real test happens.
Dollar General's story seems to hinge on inflation. What happens if that changes?
That's the risk. Right now, consumers are fleeing to discount stores because they're being squeezed. If inflation eases or the economy strengthens, people might start spending more freely again, and the advantage shifts. Dollar General's relative strength could reverse just as quickly as it rose.
Why does Regal Rexnord matter less to most people than Dollar General?
Because most people shop at Dollar General. They don't think about electrical equipment makers. But Regal Rexnord's strength suggests something broader—that industrial and manufacturing sectors are holding up. It's a different kind of signal about the economy.
If I bought at the buy point, how would I know if I was wrong?
You'd watch the moving averages. If the stock falls below the 50-day line and can't recover, that's usually when you'd admit the pattern failed. The moving averages are where the stock finds its footing. Lose them, and you've lost the setup.