Chipotle Mexican Grill (CMG) is up on better than expected earnings. Here’s your trade. (July 25, 2017)

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I want to look at Chipotle ( NYSE:CMG ) today. I love Chipotle ( NYSE:CMG ), the food, though I haven’t eaten there lately, has nothing to do with the news. The stock has really just been taking it on the chin because of the E. coli outbreak here, and then after this rat thing a big decline here. And it got really over extended until today where the stock rebounded off of 340.00. Then after earnings were released the stock catches some buyers, I guess their same store sales, the sales in their stores, was higher by about 8 percent. So that is a nice thing.

Here is the thing, this could be setting up a shorting opportunity. I am not talking about tomorrow morning. I think after all this decline, the big sell-off that this thing has had, I really feel like this is almost a climax low. Almost. I would want to see this climb higher for a few more days, and then what you look for is, you look for the climbing to kind of taper off. You look for the stock to kind of level out here. You want to see it move higher, you want to see it move higher. And then the first down day there is, say the stock hits 370.00 and then ultimately closes lower; then what you want to do is, you want to be shorting the stock. You are shorting the retracement to the trendline. You are shorting this, and then as the stock moves lower you are putting your buy stop right above it here.

So you don’t short it tomorrow morning. Maybe that will work, but maybe it won’t work. I have no edge and neither you do right now. What we want to see is the stock move higher for a few days. Once it gives us an indication that the buying has dried up we want to see upside volume on the decline. It will be strong tomorrow so we want to see that on the decline; we don’t necessarily need to see an increase in selling volume. What we do need to see is just a flattening out of the price and a decline in buying volume. If you get that type of thing then you short the stock. Keep a stop just above the recent high and then you are likely going to make some pretty good money on this. Because if you look at the weekly chart, I think Chipotle ( NYSE:CMG ) has move to go.

I would frankly look at this as a $300.00 stock just by virtue of looking at this chart. I have no fundamental basis for that, I am just looking at the chart and 300.00 looks like a pretty good number to me. I hope that helps. Watch Chipotle ( NYSE:CMG ). Again, I am not talking about shorting this thing tomorrow. I am talking about shorting it when the buying peters out. And I kind of feel that will be in the next few days. I don’t think they did enough to really get everybody out of this stock.