Thanks Ackman

If you're a regular here, you know I took a few shots at cardboard pizza. It's a low volume stock that has its fans, and thus has defied gravity at times. Given everything else though, within the context of the hyperbear risk and overvalued market, Domino's looked like one of many good setups. And, I like it because it is a highly volatile stock, great for options. And while I'm used to taking some losses on DPZ, I was a little surprised by its up move yet again, given the context and chart. But now it makes sense. It was being lifted by Ackman.

ZH: Bill Ackman Unveils 6% Stake In Dominos, Says He Won't Invest In Bitcoin

Speaking at the "Future of Everything" conference organized by WSJ, Ackman added that he has long been an admirer of the firm and has eyed buying its stock, but that he only just recently found what he believed to be a compelling entry point to invest. Pershing sold some of its stake in Starbucks - which, along with Pershings bets on Chipotle, marked one of Ackman's biggest turnaround successes - to finance its investment in Dominos.

Pershing started building its position in Dominoes at $330/share.

To review recent history here, Domino's (link goes to prior posts) had a nice topping pattern, one that took it below long-term support (blue). I went short as it was topping. It edged up a bit before failing. I then played the downside. Support was broken, top complete, and it plunged. Support was and still is at $300 level. It rallied all the way back to long-term resistance and I shorted again. I was surprised by the strength, but it wasn't a shocker because it's done this before. But now it's not a mystery why. Ackman started buying around the low. He pushed it all the way up to long-term resistance (former support). It spiked above resistance on the news and pulled back.

I like the risk reward here, for bulls or bears, because long-term resistance is the dividing line between the bull and bear scenarios. Above and that looks like a nice consilidation pattern about to breakout. Down and, now that we know Ackman was buying, perhaps there are't any buyers left. The bearish value thesis, if there is inflation, is that Domino's trades at ~28x 2022 earnings estimates. Good news is priced in. But the chart rules for trades, and what it looks like to me is that Ackman was large enough to defy the charts, but only as long as he keeps buying or can convert the chart to bullish. If I'm wrong, I'll find out very soon, perhaps today, and close out my position with a small loss.