Fan Yang
All posts from Fan Yang
Fan Yang in Fan Yang,

Chipotle (CMG) continues to be pressured

Chipotle (CMG) has been falling since the first case of food contamination last year. After a persistent run to 757, CMG has lost 47% of its market cap as it trades just above 400. 

CMG 4H Chart 7/18

(click to enlarge)

Price bottom attempt: 
The 4H chart shows that CMG has been consolidating around 400 since mid-June. 
This consolidation between roughly 387 and 413 was broken to the upside in July. 
The breakout however is struggling - last week, price cracked 420 before falling back to 405. 
So far this bullish breakout still looks weak:
1) Price is still under the 200- and 100-period simple moving averages (SMAs).
2) The RSI was unable to push to 70. 

400 could be key:
The 400 level could be key as a psychological level, and as the central pivot within the recent consolidation/price bottom. 
A break below 400 could revive the prevailing bearish trend for another 10% dip.  
Respect of 400 as support would suggest that the market is ready for a change of trend in the short to medium-term. 
Respect of 400 as support suggests another possible bullish correction swing to the 440 area. A more aggressive bullish outlook would be towards the 470-480 area. 

Limit the bullish outlook:
I would refrain from a bullish outlook above 500 ie. the 540 high on the year. After all, the prevailing trend coming into 2016 was bearish, and we are only talking about a small price bottom with short-term to at most medium-term implications. 
Indeed, if price eventually breaks above 540, we would likely be back in a long-term bullish mode. But for now, we have to respect the prevailing bearish bias and momentum, and keep any bullish outlook limited. 

Bearish outlook has a challenge too:
When we look at the downside, we migh tsee a challenge below the 2016-low of 387. 
The weekly chart below shows that as price approaches 350-370, there will be a rising trendline to challenge the bearish outlook. 
Also, note that 350-370 involves a support/resistance pivot area. 

CMG Weekly Chart 

(click to enlarge)