Too late to buy Chipotle Mexican Grill (CMG)? Here’s my analysis. (January 14, 2016)
CMG
In this Chart of the Day video I want to look at Chipotle ( NYSE:CMG ). Here’s why: you know the stock reversed yesterday. Somebody out of the company said that they believed the E.coli issues are going to be resolved soon, and the CDC will, essentially, be reporting that soon enough. I don’t know the particulars, I just know that it has something to do about the pending end of E.coli in Chipotle Mexican Grills ( NYSE:CMG ) food; which actually warms my heart because I actually like their food. I even eat it for the same reason I don’t buy a lottery ticket. I think the chances of me winning the lottery are about nill, so why spend the money? And I think the chances of me getting E.coli are about nill, so why not spend the money? But that’s just me.
The point is, this stock has absolutely been getting CRUSHED. Besides, did I mention they serve beer there? So the stock had been getting crushed and on that news you see this reversal. And then today the stock continues it’s merry way higher. As a trader you’re looking at this and you’re saying, “You know what? I can’t buy this now, it’s gone up too much. In two days the stock has gone up over 10 percent. I cant’ buy that.” HUGE volume here by the way. Higher volume today, on Thursday, than Wednesday on the turn around day. But here’s what I’m suggesting, I get this, this stock is up here, but it’s up on fundamental news. If you look at the weekly chart it still looks scary as all get out here. But this is, so far, kind of an inside week. Not really, although this is actually a good thing. This week has extended BELOW last week’s intra-week low, right? But the bears have been rejected and the bulls have pushed this up higher.
My point is this: if this was a DAILY chart instead of a weekly chart (this is a good way to look at it), if this is a DAILY chart instead of a WEEKLY chart, wouldn’t you look at this and say, “You know what? I’ve got to buy this stock, this is the first day of a turnaround, the stock really sold off hard. I’m going to go ahead and buy that stock. If the stock gets up to 500.00ish (which by the way is almost 50 points), if the stock gets up to about 500.00 then I’ll start watching it pretty close. Hopefully we’ll get all the way up to test this last support level here that broke down. But I think I’m kind of early in this trade.” Okay, that’s what you would be saying if this chart here was a DAILY chart. But it’s not, it’s a WEEKLY chart. So you look at this and it’s kind of scaring you away.
Here’s my suggestion, scale in. I think Chipotle ( NYSE:CMG ) is going higher. But you scale in, you take some stock right now, nodding to the gods of Wall Street that the stock has gone up two days in a row in a big way. So as soon as you buy the stock it’s going to pullback, because that’s what they always seem to do when you’re getting in on the third day of a rally. But you take a small position now, and then if the stock continues to move up, at least you’re in and then you can scale in accordingly and actually take a bigger position. So what I’m saying is, I think Chipotle ( NYSE:CMG ), for the time being, is done going down. And because the REASON that it was going down so much was because of something that we know about, it’s not like, “Their same store sales numbers are shrinking.”
Well, yes they are if you think you’re going to get sick eating their food it’s a weird thing about how restaurants do that. But because we KNOW the main catalyst for this thing to be moving down as low as it has, then when that catalyst, when the E.coli issue actually DOES go away, and by the way you can get that eating anywhere it just so happens that there was some kind of problem at Chipotle ( NYSE:CMG ). I have my private ideas as far as why that is, but I’m not going to share them with you because I don’t way to want to make half of you mad. So with that said, I think the path of least resistance on Chipotle ( NYSE:CMG ) is STILL higher, just as long as you’re entering in percentages as opposed to just 100 percent, I’m all in, so you can manage your risk.
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