Many traders have been following the stellar move in Chipotle Mexican Grill (CMG) though the recent sharp pullback has spooked many participants.
Let’s take a look at the key short-term price levels (and chart structure) to watch for potential opportunities in the weeks ahead.
First, the Daily Chart levels:
Two main levels have developed on the chart, which are emphasized on the intraday chart below:
- The first is the Upper Resistance from the falling 20d EMA at $420.
- The second is t he Lower Support via the rising 50d EMA ($404) and “Round Number” support at $400 which is also the April 2012 swing low.
Luckily, these serve as easy reference levels: $400 and $420.
Let’s take a moment to discuss a few more factors from the Daily Chart before focusing on these levels.
The most obvious development is the “creeper” power-rally through early 2012 that provided an extra-stable angle of ascent in price – you just don’t see patterns this clean very often.
The rally produced a mini-bull flag and successful retracement test of the rising 20d EMA in early April.
From there, price pushed one more time to $440 ahead of the sharp retracement/decline that brings us to our current position between these two “Bull/Bear” reference levels.
The potential for a trend reversal exists IF price breaks under the $400 level – that’s something CMG Bulls must watch carefully.
However, the Bears must be on guard for a turn-around rally and breakthrough above the $420 pivot level – a move above $420 suggests a resumption of the uptrend and continuation swing back to $440’s high.
These will be the two objective scenarios that lead us to the game-planning in real-time:
Bullish for Trend Continuity if above $420 or Bearish for Trend Reversal under $400.
The intraday chart clarifies the picture:
The intraday chart with the recent volume and momentum divergences – at the moment – tends to favor the Bears as long as price remains under the $415 pivot (EMA confluence).
The potential for a “short-squeeze” exists between $415 and $420 (the ‘neutral’ zone).
Finally the Bullish Breakout Buy trigger develops above $421 and $422 (to be safe).
If you’re active in trading CMG shares or options, keep these levels in mind in combination with additional signals/trades you are managing.
Corey Rosenbloom, CMT
Afraid to Trade.com
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