Domino Pizza (DMP) Chart Review
NB: The charts shown in this review were taken prior to the close of trade on the 7/12/16.
Domino Pizza is one of those stocks that if you never owned it wish you did. It has become one of those amazing success stories, where you can start off as a small company with a big vision and grow into a multi-billion dollar company.
Domino Pizza has become a fast growing company with consecutive years of strong profit growth that now spans multiple countries. Due to its amazing growth the stock has gone from below $10 a share only a few years ago, to a stock that reached over $80 a share in August this year.
Has The Dream Run Ended?
Observing the monthly chart below of Domino Pizza, it would appear the stock looks to be in trouble as it's in the process of breaking its second uptrend. If you take a closer look at the chart below, you will notice that Domino's had previously accelerated its price growth on 2 occasions from its original long term uptrend. (See chart trend lines below) Currently in December it appears that the stock is slowing down considerably as it heads back to its original long term uptrend that began in 2013. (See chart)
Although Domino's would be considered to be in a very strong uptrend based on its long term history. The current price action suggests that if Domino's was to trend towards its original long term uptrend, the stock has a long way to fall before it reaches its destination.
The nearest support line to watch out for Domino's on the monthly chart is at the $63.90 level. If the stock closes below the support level on a monthly chart, it will confirm the break of its second uptrend, with little support for the stock to head lower.
I have circled momentum on the chart to highlight that even though it's still positive at 7.30 it has fallen considerably from the highs as it heads toward zero momentum.
Since its still early in December it would be appropriate to take a wait and see approach towards the end of the month. NB: Global and Aussie stock markets are quite bullish presently heading into the Christmas rally, so to see Domino's weak in this environment doesn't bode well for the stock.
Weekly Chart - Key Levels To Watch
The weekly chart shows the stock is at a current key level in terms of trend and support levels. If Domino Pizza were to close below the $64.40 level by Friday's close it would confirm the break of the long term weekly trend as well support. This would be an extremely bearish sign for the weekly chart.
Provided we close below the nearest support, the next step for Domino's is $60.50. With momentum at negative 7.67 and heading lower the probability of break of trend on the weekly chart is high.
If buyers were to step in by the end of the week and hold support of $64.40, look for the stock to move towards resistance level of $70.30 and make another attempt to close above this level.
Daily Chart - Multiple Bearish Indicators
Domino's Pizza on a daily chart is at a critical price level, as the stock approaches support of $63.85.
Currently the price is below the 10, 50 & 200 day moving average suggesting the stock is under heavy selling pressure. Many traders and investors use the 200 day moving average as a key indicator for a stocks trend.
Momentum is negative 5.05 and falling, showing the selling strength is accelerating and supporting the price lower from here.
As previously mentioned since the stock is weak in an overall bullish environment for Aussie stocks, suggests that the stock is no longer popular to own for its potential share price growth prospects in the short to medium term.
Potential Death Cross
Watch the support level of $63.85 over the next few trading days for this stock, because if the stock continues to fall from these levels it will pull the 10 & 50 day moving average below the 200 day moving average. If this occurs it would form what traders call a 'death cross' which ultimately confirms that the stock is in a downward cycle in price.
Overall the stock appears quite bearish on all 3 charts presented, even though the stock is still comfortably above it long term trend on the monthly chart. Over the longer term the stock could resume its upward trend and respect its longer term trend, however over the next weeks and months may continue to struggle relative to the performance of the ASX market.
Thanks for checking out my latest chart review.
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Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.