Three Names to Watch
Each weekend I try to compile a list of 10-15 names that may not be discussed quite as much or perhaps have fallen out of favor or even just off my personal radar screen. There were a few speculative and aggressive names that popped up and may be worth a look later today, along with some short names. But most traders tend to lean toward the long side of trading, so I feel it best to start there.
First up is Chipotle Mexican Grill (CMG) or as Mr. Byrne affectionately calls it, "Rat Burrito." Of course, that has nothing to do with their actual ingredients, but more with the valuations and trading patterns we saw in the past. Valuation has come down quite a bit as earnings continue to increase as price is off around 33% from the May 2012 highs. Still, this one isn't cheap. But CMG certainly has plenty of room here for international expansion. Valuation aside, the technical picture here is very interesting. CMG seems set up for a big move here in the very near term as this wedge pattern nears culmination. Earnings are due out in the first week of February with the $300 straddle pricing in about a $30 move while this wedge pattern, earnings aside, looks to signal a move of $20-25 possibly BEFORE earnings. I am really considering the Feb. 15 $300 straddles right here. I suppose I could sell the Jan. 18 $280 put/$320 call strangle against it, but in my view the $1.20 net credit is not worth it. If CMG closes over $306, then the upside looks very, very attractive. The stock looks like it has pretty good support around $275-280, but I would get nervous as a long below those levels. Still, CMG can be a pre-earnings short on a close beneath this current wedge pattern. I would rather play the long side breakout if it occurs, as I believe there to be more upside there....301 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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