On the surface, a chart of Chipotle shares might seem a little bit too messy to bother with, but in reality I actually think it’s fairly clean. I see clear overhead supply since our initial upside targets were hit at the beginning of the year. The weight of the evidence suggests that we should see a new leg higher soon and from a risk management perspective, our levels are very well-defined. We like that.
The first chart shows us how we arrived here. This overhead supply since the beginning of the year is the 161.8% Fibonacci extension of the correction last Spring and we’ve struggled with this level all year.
This next chart shows us how we can determine our next targets upon completion of this sideways consolidation. The 100 point range gives us a measured move target of $800 and the 161.8% Fibonacci extension of this recent correction also takes us just above $800 so this is our target. Risk management-wise, no reason to be long if prices are below 700 and aggressive longs can add only if we have cleared this resistance from earlier in the year.
Here is a short video that goes into a bit more detail:
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