We looked at the charts of Domino's Pizza (DPZ) a month ago, and we said, "Prices could trade sideways between $190 and $210 for a few weeks, but a retest of the June/July highs seems in the cards. Traders should either buy a dip toward $190 risking below $180 or buy strength above $215 and $222."
If you bought the dip to $190, you are probably getting stopped out with the price weakness today. Prices are below the declining 50-day moving average line (see the chart below) and the cresting 200-day line. Prices are also retesting the late August lows. Not good.
In this daily bar chart of DPZ, above, we can see the On-Balance-Volume (OBV) line turned down last month, signaling increased selling pressure. The overall chart pattern going back to February may be considered a head-and-shoulders top pattern. Taking the height of the pattern from the neckline to the head would give us a $140 downside price target.
In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator, which declined below the zero line in October to generate an outright sell signal.
In this weekly bar chart of DPZ, above, we can see prices have broken below the cresting 40-week moving average line. The weekly OBV line is turning down and the MACD oscillator is poised to decline below the zero line for an outright sell signal on this timeframe.
In this Point and Figure chart of PDZ, above, we can see prices have made a number of rally failures, and a break of the $176 level could precipitate a deeper decline to the $145 price target.
Bottom line: When you watch football tomorrow night in your family room or man cave, you have a choice of where to get your pizza and what beer to buy. The same goes with investments. DPZ looks vulnerable to further declines and the chart is not appealing right now no matter how many toppings are added.
