Bullish investors would be wise to maintain a vigilant eye on Chipotle Mexican Grill (CMG) stock over the next trading week.
On Friday, shares of CMG dropped nearly 2% as the stock is falling prey to an increasingly bearish trend.
Chipotle Mexican Grill shares rallied more than 6% last week, taking the stock to a critical technical test.
The rally resulted in Chipotle testing its 200-day moving average. This trendline is one of two that Wall Street traders focus on as a barometer of a stock’s health. The other is the stock’s 50-day moving average.
Chipotle shares failed to move above that critical trend line, reversing the stock some 6% lower. Now, the stock is heading back towards those recent lows just above $55. A move below that price would initiate another round of selling pressure for Chipotle stock.
Looking at the last six months, Chipotle stock has displayed a clear “muscle memory” effect at the $55 price level.
The price acted as resistance in late summer, then turned into support for the stock in November.
The significance of the price to the market means that a move below $55 would spark increased selling as investors look to avoid further declines.
Chipotle stock remains in a long-term bull market trend, however a move below $55 would likely challenge the long-term outlook.
The stock’s 20-month moving average currently resides at $51.83 meaning that $50 is the current “Must Hold” price for Chipotle to avoid slipping into a long-term bear market.