Potential for decline into Sept/Oct remains
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Domino's Pizza (DMP)
Technical Recommendation: Reduce
(Click here for DMP fundamental research and company information)
DMP has been an exceptional performer, rising in steady trend since early 2009.
The advance since last October has unfolded in a relatively clear channel; price pushed toward the upper limits of that channel in July and has since declined.
The stock remains above its rising 40WMA at this stage but the recent weakness has pushed price below the October uptrend. There is the chance that price could quickly reverse, keeping the uptrend intact, but the action in the weekly stochastic suggests otherwise. Note the uptrend in the stochastic, marked below, which has recently been violated. This implies that the recent price decline is more serious than the others since October, confirming the validity of the break in the price trend.
DMP is oversold in the short term, and the 200DMA and the Fibonacci 38.2% retracement sit just below current levels at $8.44–$8.50. There is always the possibility that the stock can rebound from that level.
But at this stage there is nothing to suggest that a reversal of significance is imminent, and risk over the next few months is to the downside.
(click image to enlarge)