Shares of Chipotle Mexican Grill (CMG) surged more than 4% in extended trading on Wednesday after the company reported better-than-expected second-quarter results. The strong demand for the chain’s menu items allowed it to sustain revenue growth without lowering prices. In this article, we will take a closer look at Chipotle’s technical chart and highlight important price levels to watch for after the earnings announcement.
Chart Sets Stage for Earnings-Driven Bounce
After reaching a record high in June, Chipotle shares experienced a correction of around 24% on above-average volume. However, the stock seems to have found support near a trendline that connects a pause in the stock’s longer-term uptrend in February and the closely aligned 200-day moving average. Additionally, the relative strength index (RSI) recently entered oversold territory below the key 30 threshold, indicating a potential earnings-driven pop from this support area.
Monitor These Key Overhead Chart Levels
If Chipotle shares stage a post-earnings recovery, investors should pay attention to three key levels where the stock may encounter overhead resistance. The first level to watch is around $57, where buyers who bought the dip may be eager to lock in profits near price consolidation that occurred between October 2023 and June of this year.
A close above this level could lead to a move up to the $61 level, where the shares are likely to face resistance from the downward sloping 50-day moving average and a horizontal line that connects several price points from late April to early July. This level also roughly aligns with the 50% Fibonacci retracement level, using a grid stretched from the June high to the July low.
Finally, if the stock experiences an extended bullish move, it could rally to around $65, which is just 6% below the all-time high. This level is near a trendline that sits above a narrow range of price action between April and May.
Chipotle shares closed at $54.04 in after-hours trading on Wednesday.
Conclusion
Chipotle’s second-quarter results exceeded expectations, leading to a surge in the company’s stock price. The technical chart suggests that the shares have found support near a trendline and the 200-day moving average, setting the stage for a potential post-earnings bounce. However, investors should monitor key overhead resistance levels at $57, $61, and $65, as these levels may limit the stock’s upward movement. As always, it is important for investors to conduct their own research and analysis before making any investment decisions.
Disclaimer: The comments, opinions, and analyses expressed in this article are for informational purposes only and should not be considered investment advice. The author does not own any of the securities mentioned in this article.
