If you thought 2018 was sizzling for Chipotle Mexican Grill (NYSE:CMG) stock bulls, it was. But if you also missed out, don’t worry — CMG stock is setting up for more fresh-fast price action to come in the weeks and months ahead. Let me explain.
Sometimes you simply have to listen to the price charts and shut out the noise of bearish talking heads within the canyons of Wall Street. Over the past couple years, that has more or less been the case with fresh-fast Mexican food chain Chipotle.
As most anyone with a passing interest in the stock market knows, bearish operators and Wall Street’s analyst community were fairly relentless in grilling CMG stock bulls following the company’s well-publicized food scares, presuming the death of the Chipotle brand with consumers. But time typically heals most wounds on Wall Street. CMG stock has proven no exception.
After a painful couple years, profits and sales saw a new, healthier trend emerge, while Chipotle shares soared back more than 45% in 2018 compared to an indigestion-producing down year for the broader market.
Changes to health protocols and management, as well as forgetting (or at least forgiving) investors and aggressive marketing campaigns, all but proved Chipotle is back and here to stay. And despite last year’s enviable rally, the CMG stock chart is serving up a very bullish picture strongly suggesting the best is yet to come.
CMG Stock Daily Chart
If you’ve followed the whereabouts of CMG stock the past couple weeks, you’ve had to keep a close eye on shares. While the market has enjoyed a nice rally since late December, Chipotle has surged higher by just over 30% and has gotten within spitting distance of its one-year, intermediate high captured back in August.
The other manifestation of CMG’s massive rally is that shares are currently overbought in the near term. Combined with Chipotle being so close to the prior highs and potential resistance, if a shrinking bearish community was to try and make its pitch CMG stock is a short — now would be the time.
CMG Stock Weekly Chart
Alternatively and taking a look at the big picture, if traders are tempted to short shares, I’d strongly suggest not overstaying one’s welcome. It’s our contention the weekly chart of CMG stock is unequivocally bullish.
After breaking out from a volatile bottoming pattern in early 2018 and into a new bull market, shares of Chipotle have formed a very healthy-looking “W” or high-level corrective double-bottom base which enjoys a supportive stochastics set-up.
With CMG breaking above the formation’s mid-pivot resistance level this past week, shares are in bullish position to digest the overbought gains before breaking out to new intermediate highs. For bullish investors agreeable with our forecast, I’d suggest waiting for some modest backing and filling of CMG stock to occur first, rather than buying shares today.
In a perfect world, Chipotle’s price action could take on the shape of technical-based handle formation wherein the mid-pivot acts as support. In a less-perfect reality, I’d say buying on weakness with a stop-loss below $465 in order to make sure the spirit of the pattern and your portfolio remains intact is a very healthy choice to make.
Investment accounts under Christopher Tyler’s management currently own positions in Chipotle stock (CMG) and / or its derivatives. 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 options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.