- Posted by Greg Harmon on July 22nd, 2014 at 2:56 pm
Monday night Chipotle Mexican Grill, $CMG, the grandaddy of the burrito, reported earnings and hit a grand slam. It is tough to buy this stock at over $660 a share in any sizeable quantities. And frankly, from a technical perspective the gap higher took it into overbought territory and out of the Bollinger bands, a volatility measure. But if you have a hankering for Tex Mex there is another company that has a totally different stock price set up. Chuy’s, $CHUY, owns and operates Tex Mex restaurants in Texas and the southeastern and midwest states. I have never seen one but I can tell from the chart below that the market has clearly preferred other companies over the last 4 months. But it also says that view may be turning.
There are 3 signs in the chart that make it interesting for at least a short term trade. First, the price bottomed 3 days ago and has followed through higher over the last 2 days. The volume on the sell off from early July was relatively high and has now subsided, indicating that sellers may have exhausted their holdings. Finally the RSI, a momentum indicator, is reversing higher from a deeply over sold level.
None of this guarantees a reversal in price higher but it does set up a good reward to risk mean reversion trade. Using the low at about 26 as a stop loss point, so risking about $1.25, a buyer can look for a reversion to the 32 to 36 area where all of the moving averages have been. Good for between a 3.8-7.0 reward to risk ratio. That ought to quench your appetite. I picked up some today at 27.25.
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I remember the high flying Japanese market of the 1980′s. Japanese people everywhere. Buying Hawaii, Pebble Beach anything they could get their hands on. Then […]
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A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes. Last week’s review of the macro market indicators […]
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Smelting, $9 Baseball, WWI, Freebird and Spain all in one place!
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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