21Sep10:51 amEST
From E. coli to D-Day for Chipotle
It has been a tumultuous couple of years for both Chipotle Mexican Grill and Bill Ackman.
Separately, both brands have suffered hits to their mystique, with CMG's broad market leadership status tumbling with its share price from $758.61 two summers ago to a recent low of $295.11. Amid the downtrend, we saw E. coli, Norovirus outbreaks to add salt in the wound of a brand losing a bit of its luster anyway.
And Ackman suffered a few public defeats in the Battle of Egos with Carl Icahn, regarding a HLF short, not to mention a VRX long.
Thus, it may be fate that Ackman and CMG have now locked arms. As recently as yesterday on CNBC, Ackman was touting Chipotle as being "extremely cheap," and praising their new queso product.
When we take a step back from recent history and the compelling drama before our eyes, we have chart which remains in a corrective, to be sure, which declining long-term moving averages clearly above price.
However, CMG recently reclaimed $300 after losing it momentarily, and exuded some interesting relative strength to the broad market yesterday. If bulls can keep the name above $300 for the rest of this week, it may be a sign that sellers have dried up for the interim, and the case for a base bottom along the $300 level makes more sense.
Also note plenty of restaurants have been trying to stage relief rallies in the last week or so. Thus, CMG appears destined for a do-or-die moment regarding its stock's next directional move. And I am sure Ackman and all of his accompanying bravado would not have it any other way.
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