Chipotle Mexican Grill (CMG) is holding the gap. Here’s what you need to know. (September 18, 2014)
I want to go over Chipotle ( NYSE:CMG ), because just a while ago we were looking for a breakout, even when this stock here, broke out and pulled back, back below 680.00. You look at that and say, I like that, I think that was on an earnings number, I’m pretty sure that’s what it was, but it might have been like the reduced cost of chicken or something.
Anyway, the stock gaps up and comes back into this prior congestion area and then it stays there. That’s kind of benign, because you look at the stock, look at it relative to where it is against the 50-day moving average, here it was pretty close, so it gets further away. While the stock marches sideways and time marches on, the 50-day moving average starts getting tugged up towards the price; it’s a math thing. Higher prices when there are more of them, the prices at the back drop off, so the average gets higher, and that’s what is reflected on this 50-day moving average.
The stock keeps working and you’re saying, “Man, I can’t wait for this puppy to pop, I’m going to be making some money here”, and it’s not doing it. Now that’s not a good development right here, if you’re a Chipotle ( NYSE:CMG ) big fan you can say, “Well it was on less than average volume.” Yes, that’s right, but it was also and 8-point drop, so that doesn’t make me feel good, so I want to stay away from this stock, right? We definitely want to stay away from this stock, it’s trickling down, that’s not good, that’s not good, that’s not good, so we definitely want to stay away from Chipotle ( NYSE:CMG ).
There’s nothing wrong with the business, it’s just that the stock has gotten way ahead of itself. So now this happens, now we’re up to present day. What I’m saying is this, the gap between here and here, the gap is holding, I’m not looking at this like, “Oh my gosh, this is a screaming buy.” No, it’s not, there’s still all of this resistance from all this trading up at these levels where the bulls are going to have to be soaking up a lot of shares, their going to have to be soaking up a lot of shares to chew through all this resistance from traders who just want their money back, who goofed up, they’re under water and they want their money back, so you’re probably going to get some resistance here.
What I’m saying is, if you’ve been holding this stock it is too late to sell, you don’t want to sell this stock now. I’m not pounding the table saying you’ve got to buy this stock. What I’m saying is, you don’t want to sell it. If you bought stock during this congestion, you bought it at 681.00, you bought it at 688.00, whatever, and the stock is now coming up, don’t sell. You’re under water, fine, hold your breath, just let the stock drift up a little bit, it is still consolidating, it just got a bit ahead of itself. This is a volatile stock, it’s like intuitive surgical for crying out loud, how’s that for excitement? This is your new support, right here, I’ll say this; the low is 642.64, if this stock starts trading below 642.64 you really need to go to McDonalds or someplace, because this is not going to play; but as long as this stock stays above this level then it’s still consolidating, it’s still drifting sideways and you’re fine.
I wouldn’t get cute and try to short this stock when it comes up here, “Oh, I think it’s going to roll over.” Only 340 thousand shares traded today, I think that’s about average volume, average volume is 400 thousand shares. That is not a lot of shares that are trading during the day if this thing gets caught in a short squeeze, so you don’t want to be part of that. But I’ll just say, hang on to the stock, if you didn’t sell it already, I wouldn’t be eager to buy it right now but I absolutely would not take this off your screen. You want to be watching this stock because there’s going to be money to be made in Chipotle ( NYSE:CMG ), just not right now.
Free Chart