Chipotle CMG Breakouts Earnings and Persistent Rallies

Oct 22, 2013: 8:58 AM CST

Chipotle (CMG) offers plenty of lessons of pro-trend trading tactics such as retracement and breakout trades in a strongly trending stock.

Let’s start with the Weekly Chart and study the lessons and current activity in this strongly trending popular stock.

Chipotle Mexican Grill CMG Chipotle Stock Weekly Chart Trend Following Trend Trading Retracement Rallies Breakouts

The main concept I wanted to highlight is the “persistence of rally” or sustained uptrend action that has occurred three times since the 2008 inflection low (four times if you count the early 2010 period).

A persistent uptrend occurs when there is consecutive upward closes on the weekly chart which tends to occur after a breakout to new highs.

As chartists (or technicians), we tend to draw parallels or insights from past price behavior and apply it (in terms of probabilities) to current situations to assess whether history will repeat or at least echo (develop similarly but not exactly).

Our trades and position management derive from “historical repeat” patterns.

Chipotle (CMG) rallied roughly $100 in sustained, week-over-week gains two times before the current breakout and sustained upside movement in the context of a dominant primary uptrend.

Use the example as a lesson in “historical repeat/echo patterns” and persistence of uptrend.

The Daily Chart also reveals something interesting about how Chipotle (CMG) reacts to earnings:

Chipotle Mexican Grill CMG Chipotle Stock Daily Chart Trend Breakout Earnings Trading

Through 2013 Chipotle (CMG) released its four quarterly earnings reports and in every case, buyers rushed into the stock to create not just an upside gap or strong intraday trend day session, but also a visual and obvious spike in bullish/buy volume (as highlighted).

Again, we look to prior chart or news/earnings events to get a sense of the probabilities of current events (for the potential of another repeat of history event).

Not only did the recent earnings announcement result in a similar bullish volume spike, but it also triggered an upside gap and breakout event above the prior price high (see weekly chart) into the $440 per share level.

At least so far, Chipotle has held its gains and traded up – in a positive feedback loop environment – above the $500 per share level.

While $500 per share is not as impressive as Google’s (GOOG) similar upside gap and breakout into the exclusive $1,000 club, we can’t discount Chipotle’s strength and persistence of uptrend.

Continue monitoring the $500 level in the context of the weekly chart persistent rally phases and be sure to use this stock as another example of the ‘Strong Stocks Getting Stronger” concept.

I’ll be discussing breakout, retracement, and reversal trading tactics live at the Las Vegas Traders Expo on November 22 – join me and your fellow traders at the free expo!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

4 Comments

4 Responses to “Chipotle CMG Breakouts Earnings and Persistent Rallies”

  1. mark Says:

    can't beat TSLA though

  2. Corey Rosenbloom, CMT Says:

    That's true! But just compare the week-over-week non-stop gains as seen in Chipotle – those are quite rare indeed.

  3. Chipotle CMG Extends Gain in Strong Uptrend | Afraid to Trade.com Blog Says:

    […] update Chipotle’s Chart from the prior “CMG Breakout, Earnings, and Persistent Rallies” post which detailed the stock’s advance and the concept of “strong getting […]

  4. Chipotle CMG Extends Gain in Strong Uptrend Says:

    […] update Chipotle’s Chart from the prior “CMG Breakout, Earnings, and Persistent Rallies” post which detailed the stock’s advance and the concept of “strong getting […]