In his first "Executive Decision" segment of Mad Money Monday evening, Jim Cramer spoke with Brian Niccol, chairman and CEO of Chipotle Mexican Grill Inc. (CMG) , the restaurant chain with shares up 35% over the past three months.
Niccol said Chipotle continues to invest in technology, innovation and its people and all of those efforts have paid off during this pandemic. He expected the bulk of its gains in digital ordering to remain after the dining rooms are reopened.
New innovations like its "Chipotlanes" drive-thru service is just one of the things that keeps the company on the cutting edge.
Niccol said the damage to its restaurants from the demonstrations hurts on many levels but that all employees are safe and the damage will all be fixed.
Let's check out the charts and indicators to see if anything needs to be fixed there.
In the daily bar chart of CMG, below, we can see that prices have more than doubled from the March low. The shares made only a brief and shallow pullback in late March and into April so traders looking for a classic retest of the March low had to "pay up" to go long. Prices are above the rising 50-day moving average line and above the bullish 200-day moving average line. The faster 50-day line is crossing the slower-to-react 200-day line for a bullish golden cross.
The On-Balance-Volume (OBV) line has been rising from the middle of March and has made its own new high to confirm the new price highs of CMG. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in late March for a cover shorts buy signal and in April the indicator crossed the zero line for an outright buy message to traders. Currently the indicator is in a take profits sell mode.
In the weekly bar chart of CMG, below, we can see the price action of the last three years. Prices refreshed the uptrend last month by making new highs. The February-March decline is deep but the long-term picture is now bullish again with higher lows and higher highs leading the charge. The slope of the 40-week moving average line is positive.
The weekly OBV line has not (yet) made a new high for the move up and is a bearish divergence when compared to the price action. The weekly MACD oscillator is clearly bullish with no hints of slowing.
In this daily Point and Figure chart of CMG, below, we used a bigger filter of five (5) boxes for reversals (the typical default is three (3) boxes). Here the chart is indicating a possible longer-term price target in the $1,389 area.
Bottom-line strategy: I have consistently underestimated the power of the rally in CMG. The Point and Figure chart above suggests that prices could trade toward $1,400 and the bar chart tells me that a close below $950 is a good risk point.