Chipotle Mexican Grill Inc. (CMG) reported its financial results for its fourth quarter and year ended Dec. 31 yesterday. The company has been pushed to make lots of changes in the past 12 months. We have not checked in with the charts since late April. Let's see what the latest charts and technical indicators are doing. Does the price action match the fundamental numbers? With the share price indicated to open sharply lower Wednesday morning we should be careful.
In this daily bar chart of CMG, below, we can see that prices made a stomach=tossing slide from May to November shedding over $200 per share. Prices have been trying to stabilize in roughly a $270 to $345 trading range. Prices are likely to retest their late October and November lows Wednesday. Heavy volume and a weak close below $270 could precipitate further declines. Prices are below the still rising 50-day moving average line but the slope of the line could turn negative soon. The January rally in CMG stopped about $17 short of the declining 200-day moving average line.
While prices have been trying to stabilize since August the daily On-Balance-Volume (OBV) line has been moving up and down with the price action. The OBV line has been weakening since the middle of January and tells us that sellers of CMG have turned more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the downside in late January for a take profits sell signal. This oscillator is close to crossing below the zero line for an outright sell signal.
In this weekly bar chart of CMG, below, we can see the loss in value over the past three years. Prices are below the declining 40-week moving average line whose negative slope has defined the decline. The weekly OBV line has its own downtrend and suggests a lot of distribution and aggressive selling . The OBV line has weakened a lot since May. The weekly MACD oscillator gave a cover shorts buy signal in November but looks like it has begun to narrow towards another sell signal.
In this Point and Figure chart of CMG, below, we can see that prices are in a down column. A $293.47 price target is going to be overrun this morning. This chart will not show a gap to the downside - - there will be a longer column of "O's." A break of $263.49 will likely open the way to further declines.
Bottom line: Check with your dietitian and your investment adviser before jumping in as a sharply lower open for CMG could start another "leg" lower. A break of $250, should it occur, would be very bearish.
