Momentum Buzz Saw – Next Up Chipotle Mexican Grille

• Posted by Greg Harmon
• on November 16th, 2011

Everybody loves the burrito and it has been a place where money has hidden for protection several times during the last few months. But one by one these momentum darlings are getting picked off and I am here to say that Chipotle Mexican Grille, $CMG, may be the next on headed for the buzz saw. Let’s take a look starting from the broad monthly perspective.

Chipotle Mexican Grille, $CMG – Monthly

The first clue comes from the monthly chart. It is clearly in an uptrend but is showing signs of at least a short term top the last 4 months. This could end up being the end of Wave (III) in the Impulsive Wave higher with Wave (IV) lower which would be expected to be fairly flat in result given the hard move down in Wave (II). The Relative Strength Index (RSI) is moving lower off of a

Chipotle Mexican Grille, $CMG – Weekly

technically overbought situation and the Moving Average Convergence Divergence (MACD) indicator is fading, both supporting consolidation or a move lower. But coming in closer to the weekly chart gives some further indications. First notice the slope of the roughly 6 month trend lines has been declining each time it is redrawn. Also the Simple Moving Averages (SMA) are progressively flattening. The same movement lower of the RSI, this time in a trend of new lows since is now combining with a MACD that is crossing bearishly lower. But moving in even closer to the daily chart shows that the 340 area has been resistance 3 times in the last 4 months. The

Chipotle Mexican Grille, $CMG – Daily

stock is making a lower low after a lower high beginning a down turn on this timeframe, finishing to day below both the 50 and 100 day SMA’s. The RSI has broken through the mid line and is nearing bearish territory while the MACD is negative and increasing supporting further downside. Will it drop 50 or 100 points tomorrow. Not likely, but a move to the 200 day SMA below, a place which it has not been below since March 2009 and which is only $24 lower, will pull in sellers and create a self fulfilling run lower.

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