All food jokes aside, CMG may present a real trading opportunity here and now. As mentioned before, CMG is currently experiencing a pennant formation, as seen in the chart below. This is essentially a price arrangement that displays a decreasing range as price gravitates toward the center of the narrowing triangle or towards the apex. The apex is where price is expected to break out, and judging by the action on Friday we be headed lower. Friday, 12/7/12, was, according to candlestick analysis, a reversal day. Price started to rally higher, above the high of the past three candles, however it was promptly rejected when it was met with sellers at the 50-day moving average and closed a mere $0.40 above where it opened. The 50-day moving average has not been a great indicator however. The last two times CMG came into contact with this line resulted in false support and resistance levels, but it was respected on Friday. If Friday’s action is any indicator, which many folks will argue that it indeed is, the larger intermediate term trend may result lower…or more specifically…the pennant breaking lower. Other restaurant stocks have seen some tough times too, but of the 26 analysts that cover CMG, most have holds or overweight ratings…so expectations have room to go lower. They expect $2.09 for Q4 2012, which is about 30 trading days away.
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Author salernoma@mx.lakeforest.edu
