Jim Cramer responds rapid-fire to callers during the Mad Money Lightning Round. On Monday evening, one caller asked about Chipotle Mexican Grill Inc. (CMG) . "I think Chipotle is right under $800 a share," responded Cramer.
Let's check out the charts and indicators of this Trifecta Stocks holding.
In the daily Japanese candlestick chart of CMG, below, we can see how prices have rallied sharply over the past five weeks on declining volume. A rally on shrinking volume is suspect and tells us that new buyers are not joining in on the advance. A lower close Tuesday is likely to give us a quick reversal sell signal with a "close below the low of the high day."
The On-Balance-Volume (OBV) line is likely to stop its advance from the March low and the Moving Average Convergence Divergence (MACD) oscillator has begun to narrow after just crossing above the zero line. Disappointing for the longs.
In the weekly bar chart of CMG, below, we can see a less than encouraging picture. Prices have rallied back to cross above the 40-week line but they are now back below it.
The weekly OBV line has hardly improved in the past few weeks suggesting that the rally was on "vapors" and there was little volume power behind it.
The MACD oscillator is below the zero line in sell territory and has narrowed greatly. We could see a cover shorts buy signal if prices continued to strengthen but that seems to be the question right now.
In this daily Point and Figure chart of CMG, below, we can see that the path of least resistance may be down for the near term. It looks like there is more overhead resistance than there is underlying support when we look at the volume by price bars on the left scale.
Bottom-line strategy: Over years of chart watching I have learned to be suspicious of rallies on declining volume. It looks like CMG is going to make a pullback/correction over the next few weeks. We'll have to see if this becomes a buying opportunity.