In his first Executive Decision segment of Tuesday's Mad Money" program, host Jim Cramer spoke with Brian Niccol, chairman and CEO of Chipotle Mexican Grill (CMG) , the burrito chain with shares that just hit new all-time highs as digital orders continue to surge.
Niccol said while 2020 was a challenging year for Chipotle, it also was one that demonstrated the company's resilience and the power of its digital operations. He said ordering online for in-store pickup is the most profitable way for customers to order from Chipotle, though the company is still eager to reopen dining rooms and give everyone the opportunity to enjoy a social experience as well.
Looking ahead in 2021, Niccol said Chipotle plans to open more than 200 new locations this year.
Let's check on the charts here on Wednesday morning to see if they can deliver after a small miss on comparable sales numbers. We looked at CMG on Jan. 22 and wrote at that time, "Because I believe that the broader market is poised for a downward correction this quarter I think CMG could weaken with the broader market. Prices are so close to their Point and Figure targets I think the prudent course to steer is to take profits."
In this daily Japanese candlestick chart of CMG, below, we can see that Tuesday's candle pattern was bearish -- a possible gravestone doji pattern. A bearish candle pattern here on Wednesday will be confirmation of a top reversal. Candles do not give you price targets, so we need to look at some western techniques. Prices are well above the rising 50-day and 200-day moving average lines but prices are not extended. The trading volume was relatively light in January leading up to their earnings numbers and the On-Balance-Volume (OBV) line rose nicely, telling us that buyers were more aggressive ahead of the report Tuesday. The Moving Average Convergence Divergence (MACD) oscillator was in a bullish alignment on Tuesday's close but the two moving averages are not far apart. A bearish crossover could come soon.
In this weekly Japanese candlestick chart of CMG, below, we see a mixed picture. Prices are still in an uptrend above the rising 40-week moving average line. If the latest candle becomes bearish on Friday's close we will need to see the price action next week for confirmation in this time frame. The weekly OBV line has not kept up with the price action since October and is a bearish divergence. The MACD oscillator gave a new buy signal in January, but that could get reversed soon.
In this daily Point and Figure chart of CMG, below, we can see that price reached a price objective of $1,515 and that a decline to $1,388 may be needed to weaken this picture.
Bottom line strategy: In pre-market activity Wednesday CMG is trading lower. It is too early to decide how deep or how long a correction will last. Keep your powder dry and let's see how things develop. The longer-term trend is up, so a correction or pullback is more likely to turn into a buying opportunity.
