Chipotle Mexican Grill (CMG) saw its quarterly earnings receive great reception from the market yesterday, gapping up on the open and closing at 1,756, a gain on the day of 11.5%. In our discussion of Chipotle in our July 21 issue, we noted that a move over 1,627 would be bullish. This jump higher is very bullish, busting through chart resistance and confirming the outlook we saw. We’re changing our recommendation from WATCH to BUY.
After a huge jump like yesterday, odds are shares will see some profit-taking today, which we welcome for a better entry price, though we’re buyers even if the upward momentum continues. We’re recommending a loose sell-stop here, near the 40-day moving average of 1,467. For more conservative investors, at or below 1,518 would be a logical, tighter stop. To the upside, we see charts suggesting shares have a path to 2,300.
Our other Watch list stocks – AMRC, APTV, GM and STEM – all had encouraging action, but remain on WATCH for now. Our Real Money and Excelsior portfolio holdings all remain in fine condition. Wednesday’s action is encouraging, but hasn’t reversed the negative bias we’ve seen, and cautious optimism remains the best approach for now.
Email with any questions or comments at brendan@cabot.net. Our next regularly scheduled update is out next Wednesday, July 28.