Shares of Chipotle Mexican Grill ( CMG) made a large outside day and lower close on Thursday.
This bar chart pattern probably does not resonate with equity traders and investors but futures traders of a certain age have this near reversal pattern permanently etched into their brain.
Let's check out the charts and I'll show you what I mean.
In the daily bar chart of CMG, below, we can see that Thursday's high/low range engulfed Wednesday's high/low range and there was a sharply lower close. Futures trading is leveraged and a sharp change in price and direction typically does not go unnoticed. Carryover selling today could "trap" some recent longs with losses. This becomes an incentive to sell.
The 50-day and 200-day moving average lines are still bullish but we know they are lagging indicators. The On-Balance-Volume (OBV) line looks like it is rolling over as does the Moving Average Convergence Divergence (MACD) oscillator.
In the weekly Japanese candlestick chart of CMG, below, we see that the most recent candle pattern could be a doji or spin top pattern. We would need bearish confirmation this coming week to mark a high on the chart but it is a start and a heads up.
The weekly OBV line is still pointed up and the MACD oscillator just crossed to the upside for a new buy signal. We'll have to wait for these indicators to reverse direction.
In this daily Point and Figure chart of CMG, below, we can see that the shares reached a price target of $1,520 and that a trade at $1,533 could start to weaken this picture.
Bottom-line strategy: I am watching the charts and price movement of CMG closer now. Old habits and old chart patterns are hard to break.
Chipotle Mexican Grill is a holding in TheStreet's Trifecta Stocks portfolio. Click here to learn more about this portfolio, trading ideas and market commentary product.
