Thursday, October 21, 2010

CMG Watch

Chipotle Mexican Grill Inc. (CMG) is showing bear phase on Person's Proprietary Signal (pps) and the parabolic sar, hours before the company releases its earnings after the close. The macd and fast stochastic are also in bear phase.

The quandary: Is the signal due to a sudden rush of negative sentiment before the numbers come out? Or is it just earnings-announcement-averse traders getting out to avoid any possible surprise?

CMG $179.60

It's a quandary that can never be resolved, for who can know the mind of a mindless market?

I last wrote about CMG on Oct. 5, and on Sept. 28 I made the case for a bull play, including a discussion of the fundamentals.

The only news today is an analyst raising the target price to $200.

So aside from the signals, it's happy talk all around.

I'm inclined to stay put rather than selling out. I would be shocked for any new information about CMG to come out the day of earnings but prior to the release. Under SEC rules, that could lead to a pretty heavy penalty for the leaker.

Also, the price bounced nicely off of the 20-day moving average and then retreated to more than 1% above that level.

And the four earnings announcements that appear on the yearly chart have all resulted in price rises, many of them gaps.

Holding a position across an earnings announcement is always a risk. Who knows what dark secrets lie on the balance sheets, only to be revealed most horribly at the earnings announcement.

In this case, given the fundamentals and the support from the 20-day moving average, I shall take the risk and continue to hold my position.

On the Person's chart, using weekly pivot levels, the price pierced the midline downward, bounced off of the lower pivot, and then retreated to just below the midline.

Person's Table
ppspps openupper pivotlower pivot
CMG $179.60 $181.72 oct21 $184.46 +2.7% $177.79 -1.0%

CMG is just three days off from having set an all-time high, so that level and the 20-day moving average set the bounds of support and resistance.

Reversal Levels
  • $184.47, +2.7% (all-time high)
  • $179.60 --- You are here.
  • $177.92, -0.9% (20-day moving average)

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.


  • h-a trend - Heikin-Ashi trend.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

  • h-a trend: Determined by the Heikin-Ashi candlestick, green for up, red for down. Heikin-Ashi averages six days for high, low and close, signalling uptrend if the close is in the upper half of the range and downtrend if it is in the lower half.
  • sto: green for bull, red for bear.
  • sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
  • psar, pps, macd: green for bull mode, red for bear.
  • macd trend: green for rising, yellow for sideways, red for falling.
  • neutral.
  • ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.

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