Who is not a fan of burritos?
Obviously, this is a rhetorical question as everyone should be a fan of burritos. Let’s be rational here: a delicious burrito filled with your choice of chicken, sumptuous steak, or a spicy, tangy, meat that is so tender that you don’t even realize you’re chewing…ah, the heavenly carnitas. Your taste buds are met with the grandiose flavors of beans, fajita vegetables, sour cream, onions and more. And if you’re a fan of guacamole like me, you are worried because your burrito can only physically contain so much of this delicious avocado spread.
Obviously, I am a big fan of Chipotle Mexican Grill (CMG) with their cool environment, stainless steel decor and delicious Coca-Cola beverages. Personally, I still prefer Moe’s Southwest Grill over Chipotle, but Moe’s isn’t publicly traded and would make a less interesting read on technical analysis.
THE TRADE
I’m as hungry for this trade to break as I am for an actual burrito right now. As always, a word of caution: let this trade come to you. If we get a close below $276.92, I would be willing to take a bearish position on CMG. Granted, there is a bit of support around $273, but it’s far from the best support that I have seen. For those of you who are more conservative, I have a lower trigger in green. (If we get a close below $268.29, CMG better invent burritos that make you actually lose weight because there is no support for a long time.)
CONFIRMATION
As of this writing, CMG is also forming a textbook flag pattern, complete with weak doji-like candles and declining volume. The overall long-term moving averages are bearish and we never filled the gap that occurred on 7/20/12. This adds to the bearish probability of this trade.
WATCH FOR RETEST
The orange line at $305.33 is a line that marks confluence. (If you’re unaware, confluence is a pinpoint support and resistance, created by overlapping Fibonacci retracements.) It would not surprise me to see CMG come up to test the $305 area as resistance. If we fail there, I might get into some bearish positions a tad early.
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