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CMG: Breaking Down

|Includes:Chipotle Mexican Grill, Inc. (CMG)

CMG has been one of the biggest "momo" stories of the last couple years. It's trading at a listed P/E of near 60. Reasonable for a fast food company, no? It's growing faster than 20% per year, which is great - though nowhere near the multiple. But valuation isn't really my reason for shorting CMG. It's the chart. It's always the chart. And in the chart below, we see that CMG has hit the upper band of a rising channel that's been in place for over a year. It has also broken under the steeper rising trendline of its most recent 5 month rally. A return to the bottom of the channel would likely bring CMG under $380.

I am definitely playing with "momo" fire, as I am now short both AAPL and CMG.

Disclosure: I am short CMG.

Stocks: CMG