For his "Executive Decision" segment on Mad Money Tuesday night, Jim Cramer spoke with Rich Allison, president and CEO of Domino's Pizza, Inc. (DPZ) , which saw its shares fell 8.7% Tuesday after the company reported same-store sales growth of 3% when analysts were looking for a gain of 4.6%.
Allison noted that overall, domestic retail sales increased by 6.8%, higher than the industry average. While the 3% same-store sales number was admittedly at the lower end of guidance, Allison said he remains quite positive on Domino's outlook.
It's not on the menu but let's call in an order of charts and indicators.
In the daily bar chart of DPZ, below, we can see a sideways market with slightly lower highs the past twelve months. Each rally in the past year petered out at a slightly lower point than the previous rally -- a subtle sign of underlying weakness.
With Tuesday's price action we can see that prices gapped below the declining 200-day moving average line. The 50-day moving average line is above the price action and cresting.
Trading volume was heavy and the daily On-Balance-Volume (OBV) line moved sharply lower as prices closed on the low of the day. Spillover selling is likely Wednesday. The lows of March and December could act as support but the volume was not particularly heavy at either of those lows. Low volume can mean that previous buyers may not look to defend that level.
The Moving Average Convergence Divergence (MACD) oscillator crossed below the zero line for an outright sell signal.
In the weekly bar chart of DPZ, below, we can see the past three years of activity. DPZ had a good rally from 2016 into 2018 but the past twelve months has been a choppy affair. The 40-week moving average line now has a negative slope so the math says the trend is down.
The weekly OBV line has a negative slope the past year, which signals that sellers of DPZ have been more aggressive. The MACD oscillator has just crossed to the downside for a new take profits sell signal.
In this Point and Figure chart of DPZ, below, we can see the recent decline without a price gap. The software is projecting a possible downside price target of $212.
Bottom-line strategy: DPZ looks particularly vulnerable to further weakness now. A break of the March and December lows could precipitate further selling with a possible downside price target in the $212 area.