Thursday, September 8, 2016

CMG Chipotle Mexican Grill Weekly Chart

La Cucaracha, La Cucaracha. Everbody sing for the burrito king. Hopefully, there are no cockroaches in the restaurants. Activist investor Bill Ackman at Pershing Square announces a large stake in troubled Chipotle so the stock pops. Folks became sick after eating the food a few months ago and the restaurateur struggles ever since. Tell that to my nephew who religiously devours the Mexican goodies at Chipotle and is glad that less people are there since he can eat faster.

Ackman has a mixed record on stocks picks and remains mired in his short HLF purgatory. Will he be luckier with CMG? Yes, probably. The falling green wedge, oversold conditions and positive divergence (green lines) forecast a launch in price which occurs over the last 2-1/2 weeks. Indicators remain long and strong so it looks like Ackman may have very good timing with Chipotle on the long side. He likely has a room full of chartists that highlighted the chart above 2 weeks ago when it was prime for a buy.

Price will likely want to tag the upper band at 460, then perhaps retreat back down to the middle band at 418 then resume the upside on this weekly basis. The daily chart gapped up yesterday so there may be some sideways digestion ahead in the daily time frame. Chipotle has been beaten down significantly over the last year so in a market downturn it may not be as negatively impacted as other stocks. Nonetheless, in a recession, people will eat out less.

Keystone does not hold a position in CMG currently but will consider a long play going forward. Ackman will likely be successful with his long Chipotle play as time plays out. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Saturday, 9/10/16: CMG finishes the week up +4.4% sitting at 426.55. Chipotle settles a lawsuit concerning its contaminated food a few months ago. This should help the stock since uncertainty is removed. Google and Chipotle team-up to deliver burritos by drone which will create a new buzz for the flailing restaurateur. Time will tell if the taco's and hot sauce can push it higher.

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