A Spicy Setup for Chipotle


Chipotle has had an amazing year, climbing 54% year to date. That move comes after a 49% rise in 2018, and a 93% gain in 2019. What’s next for the stock? Let’s go to the chart to find out. 

Just a few years ago, Chipotle’s stock suffered as patrons succumbed to a series of outbreaks of food-borne illness. This led to a three year losing streak for the stock, from 2015 through 2017. 

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Fast forward to 2020 and Chipotle is one of the hottest restaurant stocks around. The stock closed at an all time high of $1379 per share on September 2nd. Since then, Chipotle has pulled back to its 50 day moving average, shown in blue. That moving average comes in at about $1238. 

Our trading plan for Chipotle will key in on this indicator. We want to buy the stock as close to the 50 day moving average as possible. 

Also, Chipotle is on the cusp of a buy signal from its MACD indicator. I’ll stick with the trade as long as Chipotle remains above $1180 per share, represented by the black dotted line. 

The pullback in Chipotle gives us an opportunity to buy a hot stock at a discount. By using the September low as a strategic inflection point, we can do so with minimal risk. 

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.

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