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Forget the side of heartburn Chipotle Mexican Grill (NYSE:CMG) shares are serving to current stock holders. It’s time to order a bullish and well-protected spread combination from the options menu — and enjoy either sizzling gains or a well-positioned meal of CMG stock below the market. Let me explain.
It has been a rough few weeks for CMG stock. Shares are off about 14% with nary a real driver to account for the weak price action. But given Chipotle is still up 57% in 2018, it’s also hardly surprising. Still, persistent bears will be glad to tell you CMG’s current swing lower is something that’s only going to get worse.
One recent write-up at Investor Place essentially warned Chipotle, the original fast fresh restaurant operator, is now and forever going forward, a market has-been. The article went on to also strongly suggest Chipotle is an obvious victim of Amazon’s (NASDAQ:AMZN) push into the convenience food arena with its Amazon Go stores.
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In this strategist’s view, that type of bearish “fear-casting” is conjecture at best. For one, food scares and scandals are part of the operating landscape of restaurants, but not a death sentence. Even McDonald’s (NYSE:MCD) moved past its own manufactured pink slime Chicken Nuggets scandal and has had its share of food poisoning outbreaks over the years.
Number two, to suggest Chipotle is the obvious loser to Amazon’s Go markets with its store count of just two — is more than a bit presumptuous. And since the analysis also suggests CMG’s terrific 2018 is now in technical trouble due shares losing the 50-day simple moving average, I don’t mind saying there’s always a line somewhere and it may not be bearish.
CMG Stock Daily Chart
Looking at the daily chart of CMG stock and getting past the 50-DSMA failure and its possible bearish implications, it’s also true shares are oversold and remain in an uptrend. Further and supported by my own bullish linear calculations on the provided price chart, CMG is also testing a channel line for support following a fairly common corrective move of 14%. So, who’s right? The bulls or the bears?
Bottom line, there are never any guarantees with price charts — and no matter how many lines you see as favoring your position. That holds true for my current optimism regarding a CMG stock rebound. I’ll leave it at that. But fortunately there is a way to smartly position with much stronger assurances than you’ll find on the price chart or for that matter, when going long shares.