Chipotle Mexican Grill, Inc. (NYSE: CMG)

Chipotle Mexican Grill, Inc., together with its subsidiaries, develops and operates fast-casual fresh Mexican food restaurants. As of October 25, 2016, the company operated approximately 2,100 restaurants, including 27 Chipotle restaurants outside the United States; and 15 ShopHouse Southeast Asian Kitchen restaurants, as well as owned and operated 7 Pizzeria Locale restaurants that are fast casual pizza concept restaurants.

Take a look at the 1-year chart of Chipotle (NYSE: CMG) below with my added notations:

1-year chart of Chipotle (NYSE: CMG)

Over the past three months, CMG has formed a key level of resistance to watch at the $420 (red) mark. The stock tested that level several times in October, November, and now again in January. A strong close above that $420 level should lead to higher prices, most likely a run to the $440 (navy) level.

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The Tale of the Tape: CMG has a key level of resistance at $420. A long trade could be entered on a break through that level. However, if you are bearish on the stock, a short trade could be made on any rallies up to $420 instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach