Tuesday, March 7, 2017

CMG Moving Averages Cross

Chipotle  [CMG]     

     After a couple days into a down week I was scrolling through the charts I usually do. Today I noticed that Chipotle is showing a bullish signal which I find surprising amidst all the bad news surrounding them recently. The front cover of Barron's was promoting an article they wrote saying Chipotle could have a 20%-30% downside 2 or 3 weeks ago. And today it fell 1.65%, the equivalent of $6.78 and broke below any support from the 50 or 200 day moving average. 

     The signal I did see as proclaimed in the title of this post, was the golden cross. The 50 day simple crossed above the 200 day simple. Moving averages are some of my favorite chart indicators to look for based solely on the fact that so many other investors use them. While you may not believe in charting, or that technical analysis provides any added benefit, the use of moving averages tends to work BECAUSE so many other people use them. Kind of like a self fulfilling prophecy situation. The more I study charts and learn about indicators and signals and oscillators, the more I believe moving averages can play a big role in investment decisions. (Not the whole decision. Do other research). 

     Since I am still in school I have access to my colleges Bloomberg Terminal which is amazing. It's like drinking from 5 different fire hoses at the same time, but it's still very informative and cool as all get out. I was working on a project for a class and I snapped this picture because I was geekin' out. 

     Chipotle. Bloomberg allows you to create charts on there so when I finished my project last night I whipped up a quick one on Chipotle. Much cooler looking than stockcharts. Quick note, if you want a Bloomberg Terminal all to yourself it would cost you $24,000 per year. I'll stick with the free stuff for now [ever]. 

     On the bottom of this page I'll post a page size version of this graph. It's just smaller and harder to see. As you can see, the yellow line is the 200 day moving average and the blue line is the 50 day moving average. 

     I added the Bollinger bands here because I have been trying to learn more about these and think they are interesting. The pink/fuchsia line is the upper band and the lime green is the lower band. The middle dotted white line is 20 moving average and the upper and lower bands are two standard deviations away from the middle line. The basic gist of the Bollinger bands is that can be a measure of volatility. When volatility within the stock increases the bands get wider. When it decreases, they get narrower around the 20 day. More importantly, between 90%-95% of the time the stock price is between the two standard deviations. Sometimes you can see it breaking below or above, but the most time is spent between the lines. The reason I bring this up is because the stock price is at the about touching the bottom band. Meaning, it should, SHOULD, retrace to two standard deviations to the middle line at least. 

In summary, 50 day moving average crossing above 200 day moving average. Stock price touching bottom Bollinger band and could retrace toward the 20 day oscillator band. Bloomberg is expensive but awesome. 

Here is the Bloomberg chart that fits the page. 

Here is a stockcharts screenshot to better see moving average cross.

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