Buy CMG: Chipotle’s Growth on the Menu

Yesterday, we looked at a Daily Price Chart of [Wings]( May 1st, 2024 Buy CMG: Chipotle’s Growth on the Menu Dear Reader, Yesterday, we looked at a Daily Price Chart of [Wingstop Inc.](, noting that WING stock has been making a series of new 52-Week Highs recently. For today’s Trade of the Day we will be looking at an On Balance Volume chart for Chipotle Mexican Grill Inc. stock symbol: CMG. Before breaking down CMG’s OBV chart let’s first review which products and services are offered by the company. Chipotle Mexican Grill, together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. The company offers a focused menu of burritos, tacos, burrito bowls and salads. Chipotle restaurants feature free-range, hormone-free pork, natural chicken and other meat products cooked through traditional methods and served in a unique atmosphere. Confirming a Price Uptrend with OBV The CMG daily price chart below shows that CMG is in a price uptrend as the current price is above the price CMG traded at six months ago (circled). The On Balance Volume chart is below the daily chart. On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line. On Balance Volume Indicator ● When Close is Up, Volume is Added ● When Close is Down, Volume is Subtracted ● A Cumulative Total of Additions and Subtractions form the OBV Line Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. We can see from the OBV chart below that the On Balance Volume line for CMG is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability. The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend. Confirmed ‘Buy’ Signal for CMG Since CMG’s OBV line is sloping up, the most likely future price movement for CMG is up, making CMG a good candidate for a stock purchase or a call option spread. Let’s use the Hughes Optioneering calculator to look at the potential returns for a CMG debit spread. The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in CMG stock at option expiration. The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation. The prices and returns represented below were calculated based on the current stock and option pricing for CMG on 4/30/2024 before commissions. Built in Profit Potential For this option spread, the calculator analysis below reveals the cost of the spread is $580 (circled). The maximum risk for an option spread is the cost of the spread. The analysis reveals that if CMG stock is flat or up at all at expiration the spread will realize a 72.4% return (circled). And if CMG stock decreases 7.5% at option expiration, the option spread would make a 72.4% return (circled). Due to option pricing characteristics, this option spread has a ‘built in’ 72.4% profit potential when the trade was identified*. Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat. A higher percentage of winning trades can give you the discipline needed to become a successful trader. The Hughes Optioneering Team is here to help you identify profit opportunities just like this one. Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Trade High Priced Stocks for $350 With Less Risk One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $55,000. With the stock purchase you are risking $55,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases. Have You Hear of my Platinum Reserve Trading Service? I don’t want you to miss a single opportunity to potentially reach your goals. That’s why I want to share [this video]( I made about my PRO Trading Service. I want you to follow in my footsteps for the opportunity to succeed beyond your wildest dreams, so please call my office at (737) 292-4425 and get started today! Wishing You the Best in Investing Success, Chuck Hughes Editor, Trade of the Day Have any questions? Email us at [dailytrade@chuckstod.com]( *Trading incurs risk and some people lose money trading. --------------------------------------------------------------- See Related Articles [Red Hot ‘Buy’ for Wingstop]( [LDOS: Trade Top Defense Sector Stock]( [Oil & Gas ETF Offers Trade Opportunity]( --------------------------------------------------------------- [TradeWins Logo](  © 2024 Tradewins Publishing. All rights reserved. | [Privacy Policy]( | [Terms and Conditions]( | [Contact Us]( If you didn't create an account using this email address, please ignore this email or unsubscribe using the link below. 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