has had a wild 12 months. The shares dropped from highs near $420
to lows near $240. Moreover, that decline occurred in only five
Though CMG has crawled back to $340, the stock remains the
target of bearish investors. Greenlight Capital's David Einhorn
slammed the stock last year, saying
rising food costs
would hurt profits. An earnings miss in October due to rising
costs validated his sentiment.
Then Jeff Gundlach of Doubleline Capital - my favorite bond
guru - revealed in a recent investor presentation that Chipotle
was his hot new short idea. Gundlach's last stock idea was to
down to $420 last September.
The big bears may be lurking, but Chipotle hasn't lost much
ground recently. In fact, the shares look comfortable near $340,
and haven't encountered a whiff of strong selling pressure.
However, the lack of selling may not last for long. CMG is up
against a major resistance level (blue line). This resistance
level formed after a major earnings miss (blue arrow) took the
shares down last year. CMG found resistance here for the first
time in September, and the shares proceeded to plummet 33%
This chart shows the price of
shares along with an important resistance level to
I'd be hesitant to buy CMG at the current price. The stock
could easily plunge given the bearish analyst views and the
proximity to a major resistance area.
Moreover, the stock produced three topping candlesticks this
month (blue circle). First a bearish harami, then engulfing and
finally a dark cloud formed. Though these haven't yet produced a
top, their appearance near a long-term resistance level is
However, there are a few bright spots for buyers. CMG is above
its 50-day moving average (orange line) and 200-day (black line)
moving average. These trend lines should provide a measure of
support should CMG decline.
Additionally, the stock has very little resistance above $350. So
it could be a speedy ride back to $400 if that resistance level
fails to hold the buyers back.
Equities mentioned in this article: CMG, AAPL
Positions held in companies mentioned above:
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