Hamburgers Are Rising Up Against the Burrito

For the better part of 3 years Chipotle Mexican Grill ($CMG) has been king the lunch hour with its stock rising over 800%. Oh, don’t get me wrong there have been other winners in the space, Americans are still getting fatter right? But McDonalds ($MCD), at all time highs, is up only 100% over that time frame. And others like Sonic ($SONC) have basically moved sideways. I can’t explain their secret to success but in reading their chart, $CMG is showing some signs of tiring from that run. And the hamburger joints look more that happy to take over the warming tray heat light. Let’s take a look.

The last 12 months of the Burrito run is shown in the chart below. There are at least four signs that a pullback is coming and two other supporting indications. First is the long red Bearish engulfing candle. This needs to be confirmed by a lower close Wednesday to signal a downturn. Next,

Chipotle Mexican Grill, $CMG

widening out, there is a Double Top that has formed near 340 from July and September. Third the Relative Strength Index (RSI) is also falling and sloping lower. Fourth, the Moving Average Convergence Divergence (MACD) indicator is decreasing and looks close to crossing negative. The supporting indications include the resistance area at the 238.2% Fibonacci Extension of the retracement of the move from the 2007 high to the 2008 low, and the Simple Moving Averages (SMA) are flattening and starting to roll over. Could it be a quick pullback to the trend line extension or the 200% Fibonacci Extension? Sure, or it could be deeper. But the charts also show that McDonalds, $MCD, is looking to fill its place at the top of the lunch heap. The chart below also shows a potential for a Double Top at 91.22 but as it arrives the RSI is rising towards 60 and the

McDonalds, $MCD

MACD is crossing positive. Both support more upside. The Fibonacci Fan line has created a rising support line of higher lows as it tests the previous high and the SMA’s are all sloping higher. This stock looks like it wants to be the leader. Sonic, $SONC, is looking to ride its coattails higher. The chart below shows it has stair stepped lower and then rebounded off of the bottom after printing a Hammer 4 days ago. This had been a short recommendation previously here but those days look

Sonic, $SONC

to be over for now. Now running higher with a rising RSI and a MACD that has crossed positive it could continue higher if it can get through the first resistance area at 7.75. It better have a good grip on those coattails to avoid falling back.

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