hipotle Breaks Below Trendline Support, Longer Term Trouble Ahea

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Chipotle Mexican Grill ($CMG) Daily: So last time we looked at this stock (see previous post), it managed to find support on this long upward trendline that began back in November of 2016; and since then, it has broken through that support, found some near term base around $413 and closed the day at around $416. We saw this big rolling over in the past few months, and after topping out and breaking through support, it began a precipitous drop this month. The possible good news is that this stock is oversold, and it appears to be making an effort to make a turn higher – you can see the RSI and MACD on the daily chart slowly trying to make its way higher below.

Now the bad news: the longer term weekly chart shows that the overall momentum of this stock is now to the negative side, with the weekly MACD rolling over, and the stock remains under selling pressure and under the 50 week moving average (after breaking below the trendline support). My thoughts here is that in the near term, the stock may move higher and retrace back to the trendline support that it had broken through, and it can “ride” along this resistance line for a bit, up to ~$430, but unless it can gain enough buyer momentum and make a move to break above the trendline AND moving average resistance, it will most likely follow a bearish turn lower in the longer term. Investors and traders need to be wary of the fact that Chipotle’s recent moves is a trend change, and be defensive toward the downside, and not mistaken a retracement to previous support levels as some sort of a rally in the stock. There’s always a chance that the stock will be compelled to move higher on some sort of event driven rally, but barring that, I would caution that buyers need to take a defensive stance on this stock going forward.
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