Might Chipotle (NYSE:CMG) be flashing a “bottom fishing” bounce (buy) signal at current lows?
More importantly, are you willing to risk fighting a strong downtrend?
Let’s set up the scenario and plan your course of action (or education) with this pattern:
Before you get too excited, check out my prior update on Chipotle entitled “Has Chipotle (CMG) become too Volatile to Trade? How to View Volatility.”
Beyond Chipotle, the post gives you a method of measuring a stock’s volatility.
With respect to the current set-up, is price getting ready to bounce?
We do have a pivot support level near $530 per share and a spike-reversal low off $520 earlier in December.
Note the multi-swing positive momentum divergence that has developed over the past two months.
In the membership, we do not fight trends – that’s one of our core principles.
That doesn’t mean you can’t attempt to do so and engage in Reversal style aggressive strategies.
Generally, if a steep counter-trend retracement – 0r perhaps a trend reversal – is to occur, it would likely do so at a key support pivot when positive momentum divergences are present.
That’s what we’re seeing here into the $520 and $530 per share price levels.
You would abandon bullish strategies and instead trade a breakdown IF price does move lower to shatter $520’s support level.
Until then, continue monitoring your charts and prepare for a possible bounce-rally at least back to the underside of the falling 20 day EMA (near $560) if we get a bounce near current inflection support.