BUY CHIPOTLE CALLS - SHORT TERM TRADERS MAY SEE 10% REBOUND
Updated
3 out of 4 days since 6/26 sell-off bottom, CMG has made higher highs. More importantly, 4 out of 4 days have seen higher lows than the previous day. Buy the July 21calls for liquidity. The stock is trading in a range of about 7 points a day, with that range moving higher each day. Even so, the 14 day RSI is still at a 6 month low.
You can never use Chaikin Money flows as a sole indicator, but when paired with another it can be very useful. EVERY TIME CMG HAS BOTTOMED SINCE 2016, the Chaikin money flows have bottomed with it - ESPECIALLY when the Bollinger bands spread out and you look at the peak spreads created in the sell-offs. And so it is today, as CMF nears a 2 year low. Do not let 1 day of potential selling scare you off this trade, as I think the big sellers appear done. My bet is the regular old, huge, fund supporters are starting to show up in the afternoons..
Finally, if you are bearish or have been bearish on Chipotle like I have been for so long - this is a difficult trade to put on. The fact is - this stock has been overvalued and overpriced since 2016 and that is what we have had a hard time believing. But when you think about it - why should that change now? It shouldn't - until the 7/25 earnings, anyhow. Sometimes the hardest trades to go with are the best trades you make.
NOTE Text in chart should end with "Has Always Bounced Back At least 10% Off Sell-off Lows"
You can never use Chaikin Money flows as a sole indicator, but when paired with another it can be very useful. EVERY TIME CMG HAS BOTTOMED SINCE 2016, the Chaikin money flows have bottomed with it - ESPECIALLY when the Bollinger bands spread out and you look at the peak spreads created in the sell-offs. And so it is today, as CMF nears a 2 year low. Do not let 1 day of potential selling scare you off this trade, as I think the big sellers appear done. My bet is the regular old, huge, fund supporters are starting to show up in the afternoons..
Finally, if you are bearish or have been bearish on Chipotle like I have been for so long - this is a difficult trade to put on. The fact is - this stock has been overvalued and overpriced since 2016 and that is what we have had a hard time believing. But when you think about it - why should that change now? It shouldn't - until the 7/25 earnings, anyhow. Sometimes the hardest trades to go with are the best trades you make.
NOTE Text in chart should end with "Has Always Bounced Back At least 10% Off Sell-off Lows"
Note
The pattern of afternoon buying mentioned above has made for some great INTRAday trades, but it is time to move out to the Aug 14 calls for both liquidity (where there's more open interest) and to give myself more time to trade into the 7/25 earnings release.7/25 is going to be a big day for CMG which will likely tell us whether the stock has got another leg down to go, or whether the 10% bounce is in the cards Going into 7/25, A STRADDLE may be a great play. Vertical positions can work on both sides INTRAday right now, also.
The amount and regularity of the afternoon buying has seen CMG brought back to almost no change from some 7 and 8 point deficits. As much as I do not want to be a long term owner of Chipotle, it's been a volatile enough stock where even with these premiums, the options can swing 50% or more INTRAday for some great day trades.
Depending on whether this issue can hold within a few % points of 410, we should get a strong indication as to whether the 350 plus area will be a target area to test. or whether a rebound is in the cards. CMG going sideways will just add to the break-out pressure one way or another (hence the potential straddle if that is the case going into earnings). Big money is supporting this stock and has screwed any long term bears (me included) but I do wonder how long that support will continue, and believe on 7/25 we will get our answer
Trade active
CORRECTION - AUG 14 Options above should be AUG 18 (there are no 8/14's)COMMENT -Today the pattern has changed where we are seeing a morning rally - so if today holds, it confirms much the above and while I say move out to the Aug options, obviously hold JULY CALLS thru today pending this rally's ability to hold and roll accordingly
Trade active
I AM REITERATING TO EXPERIENCED TRADERS TO CONSIDER GOING LONG CMG FOR A 10 to 30 point move from here. Using vertical call spreads or bull put spreads is the absolute best way to trade CMG -- IF you cannot or do not want to handle paying current option premiums, but I just adjusted my position to heavy long calls 2 to 10 points near the money and naked July/Aug.While I may have pointed out this bottom 3 days early, I feel very strongly that all my comments now apply all the more - and the chart is set up looking great for a SHORT TERM 7 to 10 day POP to the upside. CMG JUST CLICKED BACK ACROSS 400 mark.I had stated the potential for another leg down if the stock moved 2% off the 406 - 410 area, and that is precisely what we got over past 3 trading days.
If you are a trader, aggressive and experienced - check out the chart now and consider putting on a long position.
Note
DO NOT FORGET that earnings call for CHIPOTLE is 7/25. All comments above apply UP TO BUT NOT BEYOND 7/25. On 7/24 or earlier, there may be a good day to rejigger all positions to a short-term option straddle. As an aside, I have ALWAYS felt this stock has been way overvalued, but it has come perhaps 1/2 way back to earth so the shorting opportunity is definitely there - but less so the more CMG approaches 350 (presumably post earnings?)
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.