Option Investor
New Plays

Switching Directions

Printer friendly version


Chipotle Mexican Grill - CMG - close: 44.84 change: +2.64 stop: 41.99

Why We Like It:
We are switching directions on CMG. Earlier this week we listed it as a bearish play. The action in the stock today looks bullish. While the S&P 500 was sinking to new five-year lows CMG did not even test its October lows. There is no argument that the long-term trend is down but CMG could see a bear-market rally up to the $50 level or higher. The 50-dma near the top of its bearish channel is around $52.00.

Now this should be considered a very aggressive play considering the volatility we saw Thursday in the market. We're going to use a stop loss at $41.99 and target a rally into the $50.00-52.00 zone.

What really makes CMG an attractive short-term bullish candidate is the opportunity for a short squeeze. CMG has a high amount of short interest. The most recent data listed short interest at almost 35% of the 31.9 million-share float. That is a large amount of short interest and a small float, which is traditionally a recipe for a short squeeze.

Annotated chart:

Picked on November 13 at $44.84 
Change since picked:     + 0.00   			
Earnings Date          02/12/09 (unconfirmed)    
Average Daily Volume:       752 thousand    

Steel Dynamics - STLD - close: 8.88 change: +1.23 stop: 7.95

Why We Like It:
The sharp market reversal higher today has helped STLD produce what appears to be a bullish double-bottom pattern. If the market is really going to rebound then STLD could see double-digit percentage moves higher.

As you can see from STLD's 16% gain today the stock can be volatile. The trend is still bearish and we're trying to catch a bounce from what may be a bottom. We would consider this an aggressive, higher-risk play. We are suggesting a stop loss at $7.95. Our target is the $11.50-12.50 zone.

Annotated chart:

Picked on November 13 at $ 8.88 
Change since picked:     + 0.00   			
Earnings Date          01/28/09 (unconfirmed)    
Average Daily Volume:       9.8 million     

Premier Investor New Play Archives