DOM (Domino’s Pizza) has an interesting chart pattern, which I have highlighted below with blue bars.
Notice how there are support/resistance lines at each of the 100’s. It’s almost as if the market is “working” them.
As a recap for those that do not remember, I bought DOM at the end of March for 788p, and sold at the beginning of November for 1080p. I felt that the company got way ahead of itself in valuation. So far, my gamble has paid off. DOM hit a 52w high of 1121p, so I was within 4% of hitting the top.
That was complete luck. I have often found it to be the case that a share overshoots my expectations, and usually by a much greater amount than a mere 4%. However, if I’m patient, I find that I am sometimes proved right in the end.
It seems that the price of 1100p was just too much too fast, and just couldn’t be sustained. I think that there must have been many people doing what I had been doing: taking a profit.
We are now at the 1000p level. The next few days will be interesting, and it is kind of difficult to say what will happen next, as the kind of price move we have seen has been outside its normal behaviour pattern as of late.
The shares still look too pricey to me, so I’m guessing that the 1000p won’t hold. If the shares fall back to 900p, then this will accomplish two things: it will close the gap from 900p to 1000p, and will be at a lower trend support line.
So 900p seems like it will be the next logical level to me. The usual cavaet applies: I am a terrible chart reader, and what I say amounts to nothing more than speculative gizzard-squeezing.
I am not sure I would be tempted back in at 900p. 800p looks more interesting to me. The shares have greater support at that level, and the valuation is more attractive.
DOM has been an interesting share for me. It was something I wanted to hold for a long time. When the shares hit that 1080p I was torn. Should I just forget about valuation and hold a share I like, or should I trust my instincts that the share price was unsustainable? Run my winners, or book my profit? It’s always an interesting dilemma, isn’t it?
In the end, I felt I had to get out. I am undecided about the best strategy for getting back in. Let’s hope I don’t blow it.