All of this Fiscal Cliff talk can make someone tired and hungry. As I was thinking of what market to select for today’s NinjaTrader Chart of the Day, my stomach kept telling me a Chipotle lunch option is near. Well, they say great minds think alike and I say that a great mind and stomach think alike and thus spawned Chipotle ($CMG) as our stock of choice for today’s NinjaTrader chart. The analysis for $CMG over the past year has been a dream stock for both technical and fundamental traders. Our chart will focus on the technical analysis tools available and pre-configured within all free version installations of NinjaTrader, but will also sprinkle in some fundamental news just like adding a little guacamole to a burrito.
Our analyses begins by adding daily candlesticks and outline them with weekly box style bars to get an overall multi-timeframe picture of Chipotle’s price action throughout 2012. Next, a Swing Indicator (the green and orange dotted lines) are applied to represent the swing high and low points and generally visualizes areas of potential support and resistance. At this point, I notice a few things about this market, its Q1 uptrend move in a stair stepping fashion and also its choppy, channelling price action in Q4. Therefore, I wanted to apply NinjaTrader tools to visually get an idea if $CMG has found an area of support and if this stock is potentially ready to move again from its tight trading range. Out of my over 100 pre-built NinjaTrader indicator library, I decide to apply the MACD and ATR indicators.
Traders utilize the MACD (Moving Average Convergence Divergence) in a variety of trading methods since it offers several analysis options in one single indicator. The blue bars in particular measure convergence and divergence of a stock. When the blue bars consolidate and become smaller and smaller nearing the zero line, it generally shows the end of a current price trend. As the stock price of $CMG continues to produce smaller candlesticks, this can be measured by the ATR (Average True Range) indicator. The ATR is a measure of volatility and will decrease in value as a stock’s price bars decrease from the high of the current bar to the low of the previous close. At a value of 8.62, the ATR for $CMG is at its lowest levels since September when an immediate price break to the upside occurred.
Although our mouth is starting to water, our technical analysis is not yet finished. We still have to apply drawing tools which can be used to identify patterns and channels. The blue lines are applied using the NinjaTrader Trend Channel drawing tool to plot parallel lines equidistant to each other. Next, we can use the Triangle drawing tool to highlight the wedge pattern forming from September’s high to October’s low price. As a market’s price action forms a wedge, diverges and becomes less volatile, traders may potentially look to these markets as potential areas to enter positions as price and volatility may move rapidly after the wedge pattern is broken.
Most swing traders and active investors who rely on technical analysis methods such as the few discussed to pinpoint areas of when and where to enter a position. However, technical traders may also look at fundamentals and news to determine a long term view of whether a market may be bullish or bearish. Savvy fundamentalists trading $CMG may consider a bullish position after last month’s news of Chipotle’s new ShopHouse restaurants opening in Los Angeles, CA. ShopHouse is taking the Chipotle restaurant model, but serving Asian style fresh rice and noodle bowls made to order. As ShopHouse now expands to the Los Angeles market, potential investors may want to take notice as this could be a second stream of revenue for $CMG. Also, if the U.S. goes off the Fiscal Cliff, Chipotle serves as an affordable meal and dining entertainment option for families that may be forced to tighten their budgets.
Today’s spicy NinjaTrader Chart of the Day was powered by the fast, professional market datafeed service provided by Kinetick. Kinetick is free for end of day with all NinjaTrader versions. Now, time for lunch, any suggestions on where to eat?
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