I did a detailed case study on Chipotle Mexican Grill (CMG) in my recently published book “The Hunt For 10 Baggers”. Click Here to get the book for free. One of the things the case study reveals is that this stock doesn’t do very well in bear markets. A haircut of 50% or more is not out of the question. Especially if you consider this stock’s astronomical valuation levels.
Here is the bottom line. The stock is massively overpriced, it doesn’t do well in bear markets (and we are on the verge of one) and we are now sitting on an important support line. Should the stock break it, there is a lot more downside ahead.
Conclusion: I wouldn’t be a buyer or a holder here. In fact, I would sell the stock short if it breaks below critically important support line located at around $665-660. If Chipotle breaks below this level it would signal that it wants to go much lower. So much so that I wouldn’t be at all surprised to see $450 print at some point in 2015.
