Monday, November 22, 2010

CMG Watch

Chipotle Mexican Grill Inc. (CMG) has moved to bull phase on both the Person's Proprietary Signal (pps) and the parabolic sar, ending a four-day bear-phase sideways pattern. The price moved to an all-time high before pulling back to within the range.

ppspsarmacd obvh-a trend ma20ma50ma200
CMG $240.24

The on-balance volume has moved from a lower low to a higher high, which I've coded as side-trending. It needs a higher low and a reversal to count as an upside reversal.

The Heikin-Ashi candlesticks have moved to an uptrend, with today's candle showing a healthy up-pointing wick, a bull sign.

Today's rise brought the price close to the upper weekly pivot on the Person's chart.

Person's Table
ppspps openupper pivotlower pivot
CMG $240.24 $232.04 nov22 $244.28 +1.7% $224.64 -6.5%

Today's swing high is the only upside reversal point. Above that's, it's blue skies.

Reversal Levels
  • $241.29, +0.4% (all-time high)
  • $240.24 --- You are here.
  • $224.85, -6.4% (20-day moving average)
  • $223.01, -7.2% (bear-phase low)

For my account, CMG was a quite successful earnings play on Oct. 21. The stock has been in a steady uptrend since October 2008.

The next earnings are Feb. 9, 2011, so it's a bit early to open a position to play the next earnings. That's something that, in the normal course of things, I would look at in January.

On the other hand, why waste a good uptrend? CMG is a reasonable play even without a nearby earnings release to motivate prices.

The stock is quite expensive. One way to play it would be to buy a far-out call option, such as the January 2012 with a strike of $210. But, it is losing $5 per day per contract to time decay. Not so good.

An alternative would be a calendar spread, where you try to anticipate what the future price will be. Estimating $10-$15 per month, a reasonable choice would be to use a $280 strike, and to buy the March 2011 calls and sell the December 2010 calls, rolling the short calls forward each month.

Or, a third choice would be simple do a series of vertical spreads leading up to earnings.

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.

No comments:

Post a Comment