Chipotle Mexican Grill (CMG) shares are getting wrecked after its CEO Brian Niccol left to try and turn around Starbucks. CEO transitions are often knee-jerk reactions so it's setting up a possible profitable move for options traders. Take a step back on Chipotle.
It consistently impresses by exceeding earnings estimates quarter after quarter. The last four quarters have all been beats, and the company raised its forward guidance in the most recent earnings report. With a positive outlook on CMG, I see this pre-market drop as an opportunity to invest in a company that seems almost recession-proof.
Beyond the fundamentals, let's consider the technical side as well. Below is a one-year daily chart of CMG: The 200-day simple moving average (SMA) is widely regarded by market technicians as a support area. We are seeing signs of mean reversion around this level, with recent price action showing higher highs and higher lows.
The Relative Strength Index (RSI) is also emerging from the oversold region, further confirming an uptrend. The only caveat is that markets sometimes operate on emotions, so it's important to monitor how price action unfolds an hour after the market opens before committing to a bullish trade. The trade To initiate a bullish position on CMG, I plan to use a strategy known as a "bull call spread.
" This involves purchasing an at-the-money (ATM) call option and simultaneously selling an out-of-the-money (OTM) call option as part of the same trade. Chipotle is quite.