Buy Chipotle Mexican Grill, Inc. (CMG) Stock for Less

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Customers are starting to line up again to buy Chipotle Mexican Grill, Inc. (NYSE:CMG) again, and so are investors. For like-minded bulls, I have a great way to nibble on CMG stock that will either allow you to collect income, or buy shares at a substantial discount.

Buy Chipotle Mexican Grill, Inc. (CMG) Stock for Dirt-Cheap

Please don’t buy what the remaining bears in Chipotle stock are trying to sell you. They’re loud enough (about 20% of the float) to nearly drown out an otherwise inviting earnings report that signals more than enough safety in CMG.

Furthermore, analysts could really send Chipotle higher. The fact is with 60% of analysts sporting hold recommendations and a median price target on CMG stock of $444 — more than 6% below current share prices — Wall Street has a lot of catching up to do.

Business is on the rebound, doing better than forecast. And Chipotle shares are also being supported by a favorable chart.

A turnaround is underway.

CMG Stock Chart

It was three months ago when I last wrote about Chipotle. I was optimistic about a turnaround for burrito slinger — both its business and its stock.

CMG stock chart view 1
Click to Enlarge
Source: Charts by TradingView

The good news? The March put spread I offered up worked quite well. Premium of $1.20 or more ultimately expired worthless for a return in excess of 32% in just over a month holding period.

In the weeks that followed, what also occurred was a second opportunity to position off trendline or channel support at #2. If you happen to follow my Twitter feed, you’ll know what I was thinking at an upwardly revised price of $395 — shares of CMG looked absolutely delicious!

The fun on Twitter continued as Chipotle broke through the labeled “Guac-a-Mole” resistance and then rallying forcefully from a first consolidation, bull flag pattern around $450 a share.

And at $475 a share, CMG stock isn’t done.

CMG currently is putting together a first-stage base of about 6% in width and three weeks in duration. A drawn-in horizontal line has provided a couple tests near $465.

Friday’s bullish hammer candlestick tested the most recent incidence of support, and stochastics are flashing oversold. We’re of the mind that, technically speaking, Chipotle is setting up another chance to get long.

How to Trade CMG Stock

Given our belief that a first-stage and bullish base is being built with $465 acting as support, we like the Weekly 9 Jun $465/$460 put spread for a credit of $1.50 or better.

What’s this out-of-the-money vertical offer investors?

  • First, if CMG maintains support over the next month, the bull put spread captures the full credit for a return of 43%.
  • There’s a margin of safety or downside buffer of 2% from Friday’s close near $475.
  • This spread doesn’t require a breakout to be profitable or having to sit through an earnings event, which as we all know, can be a bit of a crap shoot.
  • Furthermore, should support fail during the life of the position, a max loss of $3.50 — less than 0.75% of CMG’s current share price — is at bad as it gets. That’s a solid feature given that risks such as monthly same-store sales and other items are always lurking.
  • Lastly, through assignment or the open market, $363.50 is the worst price for owning Chipotle. And should a large adverse price move below the vertical actually occur, that’s your opportunity to buy CMG stock for a great deal cheaper.

That’s some food for thought.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/buy-chipotle-mexican-grill-inc-cmg-stock-for-less/.

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