Still time to get into Chipotle Mexican Grill (CMG)? Depends on your entry. (February 12, 2016)

by DAN CMG 
I want to look at Chipotle ( NYSE:CMG ) today. There are a number of different things happening on this, and so I just want to go through them. First of all, big picture, deeply oversold stock, now it’s kind of forming a little bit of a choppy channel here. Ultimately where I’m getting to on this is, I think you can buy it. A really big move in a couple of days. The 50-day moving average is where it’s hit. The better time to be buying this is on any kind of a pullback, anything closer to the bottom of this channel, and here’s why: If we look at the weekly chart you kind of see a wedge here, a bearish wedge. After this E. coli dump here it’s kind of hard for me to envision the stock going further down than this. But you’ve got to “tip a nod” to the gods of chart patterns here; this is a bearish wedge, higher lows, higher highs, but they’re are kind of converging a little bit. Now, it’s not bearish because it forecasts lower prices, this thing could go up to new highs. What this is, is a pattern that has been seen a lot just before stocks roll over. Not a perfect thing. But again, you’ve got to give creditability to the pattern. Otherwise just flip a coin.

This is a stock that you want to SELL if the stock starts falling out of the bottom of the wedge. It’s not doing that right now. It’s not doing that right now, so I’m not looking at this as a stock to stay away from. But what I AM suggesting is, if this is indeed (we’ll just look at it on this daily chart) a wedge, this type of a wedge, you don’t want to be buying it at the top of the wedge. Because sure, it could pullback a little bit, you’re still in. Boom! You make a bunch of money. But the stock can pullback 20 or 30 points, more than 30 points before you find out if the wedge is actually going to be fulfilled, if it’s going to be completed and the stock is going to roll over. So you would have to be putting your stop clear down here. That’s a big amount to give up before you even know whether you’re right, wrong, or early. So my suggestion is, be long Chipotle ( NYSE:CMG ). I would want to be long Chipotle ( NYSE:CMG ), but just not quite now. Just a couple days ago I did a Chart of the Day or at least in our premium stuff, saying, “You’ve got to buy Chipotle because the worst is over, the stock has pulled back, this is where you want to be buying the stock. So I’ve been talking about this for a while. If you get another bite of the apple, 450.00, maybe on a horrible day in the market, that’s a better time to be buying Chipotle ( NYSE:CMG ).

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