Tuesday, November 16, 2010

CMG Watch

Chipotle Mexican Grill Inc. (CMG) swung into bear phase on my three principal indicators in intra-day trading. The signals were confirmed by a lower low on the on-balance volume.

ppspsarmacd obvh-a trend ma20ma50ma200
CMG $224.91

The phase shifts came on Person's Proprietary Signal (pps), the parabolic sar and the macd.

A CMG earnings surprise announced after the close on Oct. 21 resulted in a price rise of 34.3% when it peaked at $240.78 on Nov. 11. That swing high was followed by two down days, and the a third with today's signals.

CMG was a successful earnings surprise play for me. I opened a bull position the day of the announcement. My pre-earnings analysis. My post after the announcement.

I have sold my position -- long stocks -- for a 25.8% gain, on a position that lasted 18 trading days.

On the Person's daily chart, today's decline carried the price from the weekly midline to the lower pivot, where it stalled.

Person's Table
ppspps openupper pivotlower pivot
CMG $224.91 $229.58 nov16 $248.91 +10.7% $225.02 +0.05%

Reversal Levels
  • $240.78, +7.1% (swing high)
  • $224.91 --- You are here.
  • $216.86, -3.6% (20-day moving average)
  • $179.25, -20.3% (pre-earnings close)

Bottom line: It was a great ride. I would not, under any circumstances, go short CMG. The financials and chart are just too good. The next earnings are Feb. 9, and I'll revisit the stock six weeks or so before that date, just before Christmas.

Second guessing: I got out 24% below the swing high. Could I have done better? Any chart artifacts that would have gotten me out on Friday last or Monday of this week would have also gotten me out in late October, with a far lower gain. The price only broke down from range today, and the on-balance volume set a lower low only today.

The one possibility is the Heikin-Ashi signal, which showed a single down-day on Monday, and confirmed it with a second downer today. Generally, an H-A signal becomes "official" only on the second day in a row, but a hair-trigger trader would have gotten out on Monday signal, still 4.3% below the swing high.

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.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

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