Failed Reversal Takes us to New Lows for Chipotle CMG

Oct 30, 2017: 1:12 PM CST

Almost but not quite!

Chipotle (CMG) shares plunged to new lows today after failing to break resistance into a bullish breakout from support.

What’s the level and what’s the play from here?

Chipotle CMG

After another lengthy sell-off in shares, price (buyers) found support at the $300 level recently.

Positive divergences set the stage for a possible bullish reversal off this support level, and thus some traders logically bought into this key pivot.

Price did push up $35 higher toward the target of the falling 50 day EMA (blue) but buyers weren’t strong enough to generate a breakout and thus a bullish trend reversal.

The next move was yet another gap lower, shattering support as a new liquidation phase continued.

Chipotle (CMG) reminds us that trends tend to continue and surprises – via failed reversals – often come IN the direction of a prevailing price trend.

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Corey Rosenbloom, CMT

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