You might not feel like eating at Chiptle Mexican Grill (CMG) right now, but consider taking some stock home. (November 02, 2015)
CMG
We’re having a real “pukefest” over at Chipotle ( NYSE:CMG ) because of an E. coli issue. I’m all for E. coli, just not in any contact with the human race. So they’ve got an issue, closed a bunch of restaurants, I think it was like 43, something like that. But here’s the thing: the stock gapped down before, I mean this has just been pretty much of a nightmare few weeks for Chipotle ( NYSE:CMG ). The stock gaps down over 8 percent here and then rallies a bit, and then ultimately gaps down again; here it’s gapped down 4 percent.
Here’s what’s interesting, it’s gapped down to 610.00. If you look at 600.00, this is a pretty solid floor for this stock. So I’m telling you, this is actually not a bad buy point, right here. I’m not generally the guy, I like Chipotle ( NYSE:CMG ), I like their food (I just want to make sure everybody’s washed their hands), but I’m not generally the guy to buy a stock that’s just broken like this. But I think here I’ll make an exception to that. This stock is oversold, huge volume, but the cool thing is, the stock closed higher than it opened.
If we look at the daily chart, you can see the news obviously came out before the market opened, the stock printed the low of the day, like the first minute that the stock traded, and then after that it was basically all uphill. So I think, you don’t even have to put a stop at 600.00 or a little bit below 600.00. If you’re buying the stock at 623.00 don’t say, “Oh, well then I’ll put a stop at 598.00 or something, just in case the stock comes down to 600.00, and then stops me out, and then bounces without me.” So you put your stop a little bit below there. I don’t even think you have to do that.
I think you look at today’s intraday low of 608.52 and that’s how you define your risk; because you’re making a short-term trade anyway if you’re buying it, so taxes aren’t really an issue. You buy the stock now, you put your stop in there, a little below 609.00, you’ve got a $13.00 risk on a $623.00 stock. That’s not a bad risk reward, and you’re getting this stock, as we look at it here, after a definitive bottom. If though, the “definitive bottom” turns out not to be so definitive you want to get out of there. Don’t sit there and wait around for this stock to come here.
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