Chipotle Mexican Grill (CMG) shares broke out of a short-term consolidation pattern on Wednesday, initiating a “Volatility Rally” that is likely to see shares higher.
The stock has traded higher with other restaurant names like Darden Restaurants (DRI) recently. One reason for the move is improved consumer confidence in the economy and household spending.
In late October, Chipotle’s earnings came in better than investors had expected. The company’s quarterly report beat analyst expectations for earnings per share, despite a slight revenue miss.
Chipotle’s seasonal menu additions have helped to drive increased traffic to the company’s stores. Last quarter’s report showed an 11% increase in same store visits. The increased traffic is also a result of Chipotle’s customer loyalty program.
Shares responded to last quarter’s revenue numbers with a sharp 8% decline in CMG stock. That decline was quickly reversed as the stock bounced from technical support at its 50-day moving average.
Currently, the 50-day trendline holds a bullish trend.
The key 50-day trendline recently crossed above its 200-day moving average to form a “Golden Cross” pattern. These technical patterns indicate improving momentum for a stock, forecasting higher prices for the next 3-6 months.
Today’s snap higher in price also moved the stock above its top Bollinger Band. This signals the beginning of a “Volatility Rally” for Chipotle stock that will target the $70 price level.
