Domino's Pizza Isn't Likely to Deliver Positive Returns for a While

Prices gapped lower this morning in reaction to their quarterly numbers. Let's see how that may have changed a couple of charts.

Domino's Pizza, Inc. (DPZ) is the 'Stock of the Day' at Real Money on Tuesday. We covered DPZ on Monday ahead of earnings, writing that "Our three charts are mixed. The weekly chart shows a large topping pattern but the Point and Figure chart suggests that a rally is possible. With no special knowledge of Tuesday's earnings numbers I would be prepared for a move lower. I am not saying that DPZ is a short, but I would not recommend a long position at this juncture."

In this daily Japanese candlestick chart, below, we can see a gap lower. Prices have recovered from the intraday low (so far) but it is only fractionally higher than the opening price. Right now the pattern could be a long-legged doji but it is hours until the close. A stronger test of the August lows is possible in the days ahead and the $240-$250 area is now likely to act as chart resistance.  

 

 

In this updated Point and Figure chart of DPZ, below, we can see the move lower today with the gap filled in. A possible downside price target of $208 is now being projected. 

 

 

 

Bottom line strategy: Hopefully traders were not long DPZ into earnings. Prices might try to fill some of today's price gap but the risk remains to the downside and our Point and Figure chart is now projecting a move lower to the $208 area.

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