Thursday, November 17, 2011

Chipotle's a Momentum Stock, Kill It (CMG)

Last Friday Mark at Fund My Mutual Fund put together a post highlighting the damage done to former high flyers:

The Horror Show in Momentum Stocks - Netflix (NFLX), Green Mountain Roasters (GMCR), OpenTable (OPEN), Travelzoo (TZOO), Sina (SINA), et al
Netflix (NFLX) -65%
Green Mountain Roasters (GMCR) -60%
First Solar (FSLR) -57%
OpenTable (OPEN) -41%
Travelzoo (TZOO) -37%
Molycorp (MCP) -34%
Sina (SINA) -26%

Yesterday Chipotle closed down 3.30% at $316.67 and Dragonfly Capital posted:

Momentum Buzz Saw – Next Up Chipotle Mexican Grille
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 technically overbought situation and the Moving Average Convergence Divergence (MACD) indicator is fading, both supporting consolidation or a move lower...MORE 
Worth keeping an eye on.