With Chipotle Falling, Can The Bulls Regain Control?

Chipotle Mexican Grill, Inc. CMG has been a huge winner for the bulls in recent years, rallying from a low in the mid-$200s in late 2012 to over $700 per share in recent weeks.

However, since the peak a few weeks ago, the stock has tumbled down to $662.72 per share.

Can the bulls hold their ground above key technical support? Or, will the bears retain control of the situation and force the stock down another 6 percent to 10 percent?

Let's take a look.

What The Bulls See

• Net profit margins of 10.84 percent that spin off approximately $417.3 million in positive levered free cash flow annually
• Return on assets of 19.7 percent
• Return on equity of 25.09 percent
• Cash of $758 million versus zero debt
• Nil debt-to-equity ratio as a result
• A current ratio of 3.58
• A fairly reasonable price-to-sales ratio of 4.97

What The Bears See

• A market capitalization of $20.56 billion versus an estimated enterprise value of $19.8 billion
• A PE ratio of over 32 versus estimated revenue and EPS growth rates for next year of 15.1 percent and 19.9 percent
• A price-to-book ratio of 10.16

The Technical Take

Technicians note that Chipotle shares have begun to falter once again after an initial drop and subsequent consolidation in February and March. The stock, according the technicians, may be in the "c" wave on an "abc" downside correction.

Related Link: Analyst: Chipotle Is Successful Because It Sticks To What Works

The stock has support at the February low of $647.28, but the wave "c" target comes in at the Fibonacci projection at $607.99, which also corresponds with strong horizontal line support.

The bulls will need Chipotle to overtake the March 23 high of $692.43 to give them the upper hand in the battle with the bears.

Technicians would tell aspiring longs to look for entries in Chipotle at either $647.28 or $607.55.

Meanwhile, short sellers will be looking to initiate or add to positions at $647.28 or at the next resistance at $726.63.