Chipotle Mexican Grill, Inc., together with its subsidiaries, develops and operates Chipotle Mexican Grill restaurants. As of December 31, 2016, the company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants; and 23 restaurants with non-Chipotle concepts.
Take a look at the 1-year chart of Chipotle (NYSE: CMG) below with added notations:
CMG has been trading mostly sideways over the past 2 months. While in the sideways range, the stock has formed a support area near $300 (green) and an area of resistance level at around $320 (red). At some point, the stock will have to break out of the current trading range.
The Tale of the Tape: CMG is trading within a sideways range. The possible long positions on the stock would be either on a pullback to the $300 area, or on a breakout above $320. The ideal short opportunity would be on a break below $300.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT