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.
Stocks quotes in this article: DPZ

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.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

TAGS: Earnings | Investing | Stocks | Technical Analysis | Trading | Food & Drink | Restaurants | Stock of the Day

More from Investing

As Race to Chase Strength Fizzles, Here's the Question

James "Rev Shark" DePorre

Hopes for a 'V'-shaped recovery were high at first Tuesday morning, but now we must ask: Does the intraday reversal signal resumed selling momentum or a healthy pause to digest Monday's bounce?

Is This the Start of a Bull Market or a False Breakout?

Maleeha Bengali

Buying the market here is about pricing the economic recovery and the end of financial damage being priced into these stocks.

Ready, Set, Go: Netflix Is Poised for a Key Upside Breakout

Bruce Kamich

NFLX is oh so close.

Want to Bash Airline Bailouts? Well, You Helped Create This Monster

Timothy Collins

You've seen the rage over how much money these companies seeking bailouts have spent on buybacks and dividends -- but let's look at this from an aerial view.

UnitedHealth Group Is Leading the Way on the Upside

Bruce Kamich

UNH has moved up strongly from its March nadir so traders and investors should approach from the long side.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight