Brinker Is Hot, but Chipotle Mexican Grill Lacks Gusto

NEW YORK ( Real Money) -- Brinker International (EAT) operates the Chili's Grill & Bar and Maggiano's Little Italy brands of casual dining restaurants. Brinker has spent most of this year consolidating in a rising triangle formation. It broke below the support line last month and continued lower to the downside pattern target projection in the $53 area, which is also the 50% Fibonacci retracement level of the 2014 low and 2015 high.

 

A small basing process is underway above the support level and under resistance in the $56 area. Moving Average Convergence Divergence is making a bullish crossover and the Relative Strength Index is tracking higher and above its 21-period signal line. Overall volume needs to improve, but the Money Flow Index, a volume-weighted relative strength measure, is above its centerline, and Accumulation/Distribution is crossing over its signal line. Brinker is a buy after a strong close above horizontal resistance, with an initial percentage trailing stop under the 200-day Moving Average.

Chipotle Mexican Grill (CMG) is technically less appealing than Brinker and is setting up for a move to the downside. The weekly chart shows the stock heading off its 2012 low and trending higher through the middle of 2014. At this point, it begins moving sideways in about an 8% range, and the continuing consolidation is now looking like a head-and-shoulders top.

 

The long term multi-year uptrend line was broken last week, and this week, the-head-and-shoulders pattern neckline is being tested. Moving Average Convergence/Divergence has been in a bearish divergence to price during the consolidation phase and is moving below its centerline, reflecting the declining price momentum. Recent spikes in volume have all come on down days, and they have been significant relative to the 50-day moving average of volume. A weekly close in lower candle range below the $619 neckline is a short entry point, with a trailing percentage stop. The pattern projects a target in the $500 area.

Editor's Note: This article was originally published at 12:39 p.m. EST on Real Money on May 21, 2015.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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