Chipotle Mexican Grill, Inc. (CMG) Serves Up an Unexpected Rally

Chipotle Mexican Grill, Inc. (CMG) is keeping a rally going for a second day, in spite of bearish brokerage notes

by Kirra Fedyszyn

Published on Nov 24, 2015 at 2:53 PM

Chipotle Mexican Grill, Inc. (NYSE:CMG) is still making a comeback on the charts today, after the company revealed that its E. coli outbreak has spread -- now including locations in six states. Credit Suisse cut its price target on the stock to $675 from $750 this morning, but this target is still well above the current value of CMG, last seen up 2.7% at $574.50.

The shares have been on a roller coaster over the past six months -- spiking from June to August, when they hit an all-time high at $758.61, then shedding nearly 30% of their value from that high to yesterday's annual low of $532.03.

All the while, analysts have remained relatively upbeat. Of the 26 brokerages covering CMG, 14 give it a "buy" rating or better, with no "sells" to be found. And traders seem to agree. Only 4.3% of Chipotle's total available float is sold short -- just 1.5 times the stock's average daily volume. And at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX, CMG's 10-day call/put volume ratio sits at 0.95 -- in the modest 55th annual percentile, indicating a slight preference for call buying.

According to Trade-Alert data, however, it looks like puts are seeing more action today. Puts are being traded at 1.5 times their average intraday rate, with the most active option being the weekly 11/27 555-strike put, which has seen 1,452 contracts traded. Some of these puts may have been sold to open, with traders betting on a short-term floor for CMG through the end of this week.

While Chipotle Mexican Grill, Inc. (NYSE:CMG) tries to continue its rally and gain back some of its recent losses, the stock is still vulnerable to more price-target cuts or downgrades, which could send the shares lower once again. There is still good news for Chipotle fans: shorter lines and a high likelihood of a recent deep clean means this might be the best time ever to get your burrito fix.

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