In his first "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer checked in with Rich Allison, CEO of Domino's Pizza (DPZ) . Allison said Domino's new "Points for Pies" program lets customers earn points towards a free pizza, simply by sending them a photo of a pizza.
The company is using the latest in artificial intelligence to identify the pizzas and assign the points. Allison said he expects the program will grow the pizza category and Domino's share. Domino's currently has over 20 million active customers in their rewards program.
Despite the Eagles not being in the upcoming Super Bowl (regular readers know that Cramer is a rabid Eagle's fan), Allison said the event remains the biggest day of the year for Domino's and they expect to sell over 2 million pizzas. Sales are typically up 40% on Super Bowl Sunday.
Lastly, Domino's remains committed to returning cash to shareholders via their dividend and stock buyback program. Cramer said he remains a believer in the company. All that sounds good but let's check out the charts and indicators.
In this daily bar chart of DPZ, below, we can see that DPZ has turned up from a late December low. In the past four weeks DPZ has rallied back to retrace much of its September to December correction. Prices are back above the rising 50-day moving average line and the rising 200-day moving average line.
The volume pattern and the movement of the daily On-Balance-Volume (OBV) line are interesting. First we can see that trading volume did not expand much on the decline which tells me that most or many investors did not liquidate. Increased volume would have been a sign that investors were voting with their feet or their computer mouse.
The daily On-Balance-Volume (OBV) is another way of looking at volume and reduces the data to a simple line chart. Notice that the OBV line did not decline much in October when DPZ was weakening. A steady OBV line when prices decline tells me that longs are pretty much holding their positions. The OBV line has firmed this month and is not all that far away from a new high.
The Moving Average Convergence Divergence (MACD) oscillator also turned up this month to cross the zero line and generate an outright go long signal.
In this weekly bar chart of DPZ, below, we can see that prices have been in an uptrend for the past three years. The rising 40-week moving average line has marked this advance and has provided support several times along the way. DPZ is back above the rising 40-week line.
The weekly OBV line is generally positive the past three years and looks like it is edging up from late December and is close to making a new high for the move. A rising OBV line tells us that investors have been more aggressive buyers.
The MACD oscillator on this longer time frame has crossed to the upside for a cover shorts signal AND it is crossing the zero line for an outright buy signal. Impressive.
In this Point and Figure chart of DPZ, below, we can see a bullish pattern. A trade at $285.32 will be a double top breakout. A longer-term upside price target of $362.26 is being projected. That's a lot of pizzas.
Bottom line strategy: DPZ could trade sideways for a few more days or so but we should soon see a rally attempt and test of the late August high around $305. Traders should approach DPZ from the long side risking below $260. Add on strength above $285 looking for gains to $305 and higher.