How about some Tex-Mex for Lunch?

• Posted by Greg Harmon
• on January 4th, 2016

Chipotle has been taking over the news in the burrito space. E-coli as a way of doing that. And Chipotle’s stock ($CMG) has been in the dumper (pun intended) since. But that does not mean the entire space is ready for a flush (pun intended). Chuy’s ($CHUY) stock actually looks pretty tasty.

The chart below shows that after a move higher beginning in November 2014, the stock price spiked to 36 at the start of August as a last stage move. Since then it has been consolidating against resistance at 34. But it is the form of that consolidation that looks good right now.

The consolidation has taken the form of a rounded bottom. The low in September marked the turning point, followed by a series of 3 higher lows in November and December. And look at the strength to start the year. It is up 2% in a market that is down over 2% and with Chipotle down over 6%.

What is more, the momentum is picking up. The RSI is rising off of the mid line after holding in the bullish zone through the last consolidation. The MACD is about to cross up after holding at zero. The stock is thinly traded with an average of only 264,000 shares trading hands daily.

Considering a long position on the break over 34 is the safest bet, with a stop back under the break out. But an case can also be made for adding the stock now with a stop at 30. Under that level would mean a first lower low and the bull thesis negated.

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