After trading sideways for the large part of five months, there's one restaurant stock that's now a coiled spring ready to vault higher Jim Cramer told his Mad Money viewers on Wednesday evening. That stock is Chipotle Mexican Grill (CMG) .
Chipotle, which is a holding in TheStreet's Trifecta Stocks portfolio, has been one of the biggest pandemic winners because it was one of the pioneers of mobile ordering at scale.
After bottoming in May, the stock of Chipotle has been steadily marching higher. Food prices have begun to retreat and the company was able to push through a 3% to 4% price increase to customers to offset rising labor costs.
With far less post-pandemic competition, Cramer said the stock could rally a lot higher. The shares currently trade for 63 times earnings, but Cramer noted that the earnings estimates continue to rise, making the stock a real bargain.
Let's check out the charts and technical indicators of CMG.
In the daily bar chart of CMG, below, we can see that the shares have been finding support in the $1,300 area since the beginning of 2021. The top end of this consolidation zone is the $1,550 area, which has stopped rallies in February and April. CMG is knocking on the upside again as it trades above the bottoming 50-day moving average line and above the rising 200-day line.
The daily On-Balance-Volume (OBV) line looks like it just made a new high above the February peak. A rising OBV line tells us that buyers of CMG are more aggressive. The Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line last month for an outright buy signal.
In the weekly candlestick chart of CMG, below, we see a bullish picture. Prices are in a longer-term uptrend and are trading above the rising 40-week moving average line.
The weekly OBV line shows a bullish rise from its March 2020 low. The MACD oscillator is crossing to the upside for a weekly scale outright buy signal.
In this daily Point and Figure chart of CMG, below, we can see that the shares have reached an upside price target of $1,549. This does not mean that prices cannot trade higher but it can mean that some technically oriented traders may consider taking profits.
In this weekly Point and Figure chart of CMG, below, we can see a new price target of $1,999 but let's call it $2,000.
Bottom-line strategy: New longs may have to risk to $1,450. Traders could go long at current levels or on a breakout over the April highs. The next upside price target is $2,000.