The stock has done quite well during the pandemic, up 84% in the past 12 months.
Fueled by its online and mobile-ordering efforts, Chipotle finds itself at an interesting junction: It’s both a pandemic play and a reopening play.
Consumers have found comfort and convenience by ordering from Chipotle, but the Newport Beach, Calif., burrito chain should also benefit from a rise in restaurant traffic as the U.S. continues its impressive vaccination efforts.
As the economy reopens, Chipotle should continue to benefit. Starbucks (SBUX) - Get Starbucks Corporation Report is in a similar position as Chipotle and so is its stock, which hovers near 52-week highs as well.
Can the earnings report help propel Chipotle to new heights?
Trading Chipotle Stock
A look at Chipotle's chart shows us just how strong this stock has been. The shares rotated over last month’s high (at $1,511) after a big rip and continue to consolidate above that mark now.
On the upside, the rally took Chipotle stock up to $1,565, which was the high from earlier this year. This level is now acting as resistance.
Although it’s tight, this leaves us with a very clear trading range.
On a bullish earnings reaction, I want to see Chipotle stock clear $1,565 and close above the current all-time high, $1,579.52.
Above that opens the door to $1,600-plus and could set the stage for a longer-term rally up to the 261.8% extension near $1,790.
On a bearish reaction, the situation is more mixed. In fact, if earnings weren’t in play on Wednesday evening, this would be an ideal area to consider a long position.
After an extended run, the shares are testing back down into the 10-day moving average and are just above the March high. A close below the March high would signal our exit in this scenario.
Since earnings are in play, though, we need to be aware of a potentially larger move. If the stock opens below the March high and can’t reclaim it, look to see if the 50-day moving average acts as support.
Below puts the 100-day moving average in play, a level that has been solid support for months now.