Family Dollar Stores, Inc. (NYSE: FDO) reports fiscal Q3 earnings Wednesday, July 7, before the market open. Analysts expect a solid increase in profits of about 23%, but given FDO’s strong record of late, we don’t see that being much of a problem.

The company hasn’t missed an earnings estimate in 11 quarters and has logged eight straight quarters of profit growth. That may have something to do with FDO’s placement at the bottom of the retail chain, as deep discounters have lured recession-strapped consumers for the past couple of years.

Recent data, especially employment data (don’t forget June numbers come out Friday morning), are showing that the economic recovery will be a slow process. That means the Family Dollars of the world should continue to benefit from strong demand for the cheapest prices.

On the chart, the stock is pulling back to some strong support in the $37-$37.50 region. That’s where the 100-day moving average is coming into play. This area also marked bottoms in early June, May and April.

A continuation of FDO’s strong earnings history should allow the technicals to once again provide a foundation for a bounce higher.

Sentiment is mixed, with just half the covering analysts rating FDO a “buy.” That certainly leaves ample room for upgrades, which could hit the Street should FDO provide solid numbers next week.

Earnings picks are slim during the upcoming shortened holiday week. In fact, FDO is the only S&P 500 company on the earnings schedule. But that doesn’t mean you should pass it by.

Given that the stock has popped an average of 6.8% on the day of the previous four earnings reports, a July 38 or 39 call should give you a handsome return during a slow week.

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