Chipotle CMG Collapses Through Support to New Lows

Oct 26, 2016: 12:32 PM CST

Chipotle (CMG) reminds us exactly why WE DO NOT fight or fade a trend in motion.

After market close Tuesday, Chipotle (CMG) reported earnings of $0.79 per share which was half of the Wall Street consensus estimate of $1.62 per share.

Not surprisingly, shares collapsed and broke through a Rectangle Support trendline with a 10% sell-off today.

Though it seemed possible Chipotle shares had found a bottom and were preparing to reverse bullishly, clearly that is not the case with today’s price action.

In fact, the new low was confirmed by higher volume and reaffirms the higher timeframe DOWNTREND:

One of the top rules we have here at Afraid to Trade is that WE DO NOT fight/fade a trend in motion.

Chipotle’s trend was clearly down/weak and – tempting as it was by the positive divergence – shares simply broke to new multi-year lows as the higher timeframe downtrend continued.

Share prices have declined 50% from the 2015 high ahead of the e-coli news and fall-out.

Continue studying this stock as a shining example of trend continuity and the concept that “weak stocks tend to get weaker, not stronger.”

Afraid to Trade Premium Content and Membership

Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.

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 now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

3 Comments

3 Responses to “Chipotle CMG Collapses Through Support to New Lows”

  1. Intelligent Trend Follower Says:

    Bill Acan can’t catch a break! A little technical analysis could really help him stop bottom picking stocks in downtrends 🙂

  2. Chipoltle Continues to Fade - TradingGods.net Says:

    […] By Corey Rosenbloom […]

  3. Hall Says:

    Looking at the charts, I think it’s fair to say that we have good opportunity to go ahead with trading and making sure we don’t do anything silly at all. I just like to keep it all very simple and straight forward which is boosted big time by OctaFX broker where they have lowest possible spread from 0.1 pips for all major pairs to high leverage up to 1.500 while they also have rebate program where I get 50% back on all trades, so it’s really helpful.