Chipotle Mexican Grill (CMG) has been on fire this year, up almost 50% and touching all-time highs amid its recent rally.
At last check the shares ticked up 0.7%. That might not be much most days, but it is on Tuesday as regional-banking worries push the S&P 500 Index down 1.5%.
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Chipotle has been a stock that investors have been able to count on. While it saw a peak-to-trough decline of about 38% in the bear market — roughly in line with the Nasdaq — the stock has spiced up more than 70% from the June lows.
Further, the company recently reported strong results in late April, beating earnings and revenue expectations.
Starbucks (SBUX) reports earnings on Tuesday night, and that may have a slight impact on Chipotle. But so far the stock has held up pretty well. Let’s look at a potential buy-the-dip setup.
When to Buy the Dip in Chipotle Stock
Chart courtesy of TrendSpider.com
After gapping up on the earnings report and opening near $1,918 on April 26, Chipotle stock quickly burst through the prior all-time high at $1,958.55 and passed $2,000.
Now, as the rally slows, it’s got investors wondering about a potential pullback.
If we see a dip in Chipotle stock, keep a very close eye on the $1,950 to $1,960 area. The bulls are looking for a retest of the prior all-time high, and ideally this level will hold as support.
This setup becomes much more attractive if the rising 10-day moving average is in this zone, if and when Chipotle stock pulls back to it.
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A combination of the 10-day moving average and the $1,950 to $1,960 area would be a strong setup for active buyers.
If this area is support, a bounce back up toward $2,000 (or higher) seems a good target.
But if that area fails as support, it could open the door down to the 21-day moving average and the $1,815 area.
Let’s go one step at a time. For now, see whether Chipotle shares pull back to the $1,950 to $1,960 zone.
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