Chipotle Mexican Grill ($CMG) Daily: So I’m a big fan of simple, easy to find technical patterns – sometimes they’re not as obvious and you have really try to see what may be developing. But that runs the risk of seeing something that’s not really there, and then reaching for something that may or may not happen. Technicals can’t explain everything, nor do i find them to exist at all times of the life cycle of a stock – at least not in a invest-able, trade-able way. Any kind of analysis is about finding a higher percentage of certainty of something happening, and never a sure thing that you can take it to the bank on.
And one of these patterns is the Head and Shoulders pattern with a declining RSI on each peak, that rounds over (or rolls over) and breaks support. When we see Chipotle on the daily chart here, we see kind of a messy H&S pattern (not all patterns are textbook pretty), better visible on the hourly scale, if you want to further examine it. We see that this stock had a pretty good run up since Nov of 2016, and in March of this year, really pushed higher to around the $500 mark. We see that after it became overbought on the RSI and the MACD started to roll over, the proceeding technical levels continued to decline, while price held up or went higher still – this is a Bearish Divergence. And as this continued to do so and the last peak made a lower high, and broke through the neckline support as well as the 50 day moving average support, well, as they say in the David Attenborough nature shows, “Sadly, there can only be one outcome, now…”
Let’s note the level where it ended the day today after a 7.26% decline – it got support from the trendline support line beginning from Nov 2016, where this upside move began, and stopped and closed pretty much right where that line meets price. RSI is in oversold territory and MACD can go a bit farther – keep in mind that RSI can kinda move sideways here along the bottom (or even go deeper), as price continues to drop. If $CMG breaks below this support, we would have to assume that it’s gonna go down to $394, as i do not see any other meaningful support between current levels and that price point. As always keep eyes on the RSI and MACD to show you what it may be doing before it shows up on price of the stock.
And one of these patterns is the Head and Shoulders pattern with a declining RSI on each peak, that rounds over (or rolls over) and breaks support. When we see Chipotle on the daily chart here, we see kind of a messy H&S pattern (not all patterns are textbook pretty), better visible on the hourly scale, if you want to further examine it. We see that this stock had a pretty good run up since Nov of 2016, and in March of this year, really pushed higher to around the $500 mark. We see that after it became overbought on the RSI and the MACD started to roll over, the proceeding technical levels continued to decline, while price held up or went higher still – this is a Bearish Divergence. And as this continued to do so and the last peak made a lower high, and broke through the neckline support as well as the 50 day moving average support, well, as they say in the David Attenborough nature shows, “Sadly, there can only be one outcome, now…”
Let’s note the level where it ended the day today after a 7.26% decline – it got support from the trendline support line beginning from Nov 2016, where this upside move began, and stopped and closed pretty much right where that line meets price. RSI is in oversold territory and MACD can go a bit farther – keep in mind that RSI can kinda move sideways here along the bottom (or even go deeper), as price continues to drop. If $CMG breaks below this support, we would have to assume that it’s gonna go down to $394, as i do not see any other meaningful support between current levels and that price point. As always keep eyes on the RSI and MACD to show you what it may be doing before it shows up on price of the stock.