Does Dominos Deliver? Here’s my take on $DPZ (July 24, 2020)
DPZ
I want to look at Domino’s Pizza ( NYSE: DPZ ), this is why: The uptrend is pretty strong here on this stock. If you are looking at the 50-day moving average it’s kind of dragging the 200-day moving average along with it.
Here’s the deal on this, as I understand it anyway Domino’s Pizza ( NYSE: DPZ ) doesn’t have any eat-in stuff. I don’t think you can go there grab your pizza and sit there on the floor and eat the pizza. I think their deal has always been delivery and with the way that this whole thing is going with the COVID boogie and everything else I think we are going to be at a point where folks aren’t really that eager to go to Papa John’s ( NASDAQ: PZZA ). And even if they are Papa John’s ( NASDAQ: PZZA ) has a greater amount of overhead because of all of their locations. Whereas Domino’s Pizza ( NYSE: DPZ ), these guys are strip malls. You’ve seen them; I don’t have to tell you it’s like right next to the 7-Eleven only half as big.
I think their business is booming but the chart is giving us one of those fairly rare entry points. This is a real kind of sloppy chart, it’s all over the place, but every so often you will get this little drift down to the 50-day moving average that gives you an entry point; kind of like what we had just back here. We fell a little bit below it but okay fine, so you wait for the stock to run up above it, you’ve got 10, 12, 14 percent in just a few weeks. That’s not a bad return; I am not saying look for 9-10 percent in a couple of weeks. All I am talking about is the entry point. What the stock does after that I have no control over it and I am not even going to tell you what I think.
I have seen these stocks when they pull back like this. As long as they form more of a base around here the tendency is for them to move higher. But I don’t have a crystal ball but I am not going to lead you to believe that I do. I am just saying this if you like this stock if you like Domino’s ( NYSE: DPZ ) this is your entry right here. And then you are keeping a stop just a little bit below today’s intraday low. You are giving it like 3 percent. So you can buy this stock here, risk 3 percent on the trade and then if the stock starts running up you’re going to make money. So that is a trade idea for you.
The key thing for this is, it is a lower risk trade because it’s closer to the 50-day moving average and that is kind of where your drop-dead deal is. And it is also a higher potential reward trade because we have seen these stocks as they run away from the 50-day moving average, they will move back higher again. So you are risking a little bit of money to make more money, and that’s a good trade in my book.
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