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Understanding Market Reactions: The Case of Domino’s Pizza Enterprises
Recently, Domino’s Pizza Enterprises (DMP) shocked analysts with its latest disappointing results, prompting a 22% drop in share price. However, seasoned investors likely weren’t taken aback—particularly those familiar with technical analysis. The trend preceding these results, as indicated by market charts, suggested potential trouble ahead.
Chart Insights
Investors privy to ChartWatch ASX Scans were likely not surprised by this downturn. In fact, many anticipated such a decline, as the stock’s price had been following a downward trajectory before the earnings announcement—something charts can help predict. It’s crucial to note that during earnings season, trending stocks can behave unpredictably, and some, like EVT (formally a strong performer), recently tumbled despite earlier upward trends.
The prevailing trend hypothesis suggests that a stock’s price often continues in the same direction post-earnings. If a company’s stock is in an uptrend prior to results, it typically indicates a robust business model, one that analysts might already have insights on, making the results more predictable.
Conversely, companies in downtrends tend to reflect their struggles. DMP’s recent stock performance serves as a reminder that negative earnings coincided with its downward path, reiterating that charting may aid in foreseeing such pitfalls.
Downtrends and Uptrends: A Closer Look
On the flip side, stocks that were in uptrends before earnings—like Lovisa Holdings (LOV)—generally see positive movements post-earnings release, confirming their strong business fundamentals.
Interestingly, some stocks that previously appeared in downtrend charts have made a comeback. Lithium companies such as Mineral Resources (MIN) and Pilbara Minerals (PLS) have recent upward spikes, signalling renewed investor confidence.
ChartWatch Daily ASX Scans
In my ChartWatch Daily ASX Scans series, I offer compilations based on my technical analysis methods to highlight the best-performing stocks on the ASX.
Investors may opt for stocks in strong uptrends while avoiding or short-selling those in downtrends. How you choose to utilise these insights depends on your trading strategy.
Current Uptrends Scan List
Here’s a snapshot of today’s top performers showing positive momentum:
| Company | Code | Last Price | 1-Mo % | 1-Yr % |
|---|---|---|---|---|
| The A2 Milk Company | A2M | $9.29 | +14.8% | +61.0% |
| Global X Battery Tech ETF | ACDC | $106.57 | +7.2% | +32.9% |
| Alkane Resources | ALK | $1.040 | +46.5% | +147.6% |
| Eagers Automotive | APE | $22.55 | +18.5% | +119.6% |
| Austal | ASB | $7.12 | +13.0% | +206.9% |
The features showcasing the strongest excess demand among these are:
- The A2 Milk Company (ASX: A2M)
- Alkane Resources (ASX: ALK)
- Eagers Automotive (ASX: APE)
Current Downtrends Scan List
Conversely, here are some of the prominent stocks currently in downtrends:
| Company | Code | Last Price | 1-Mo % | 1-Yr % |
|---|---|---|---|---|
| Audinate Group | AD8 | $4.71 | -25.0% | -52.9% |
| Accent Group | AX1 | $1.410 | -4.7% | -31.2% |
| Domino’s Pizza | DMP | $15.10 | -17.5% | -52.5% |
| Endeavour Group | EDV | $3.95 | -2.9% | -28.6% |
Stocks with excess supply include:
- Audinate Group (ASX: AD8)
- Endeavour Group (ASX: EDV)
- Ebos Group (ASX: EBO)
- Inghams Group (ASX: ING)
Final Thoughts
While the future remains uncertain in the stock market, the data provided by technical analysis forms a valuable foundation for making informed investment decisions. Trends change, and keeping track of them through diligent research is critical. Always conduct your own analyses before making trading decisions, as trends can shift rapidly without warning.
