Stocks have started to trade sideways in recent weeks. That’s not a huge problem with markets at all-time highs. The longer stocks trade sideways, the more likely they’ll have a strong breakout when that trend ends.
So far, signs point to a bullish breakout. The economy remains strong, if slowing. Inflation is coming down, and investors are looking forward to a decline in interest rates. That’s a good combination for consumers and companies alike.
That’s why investors may want to buy the ever-so-slight dip in Chipotle Mexican Grill (CMG). Shares just recently split for the first time, making them far more affordable for investors and traders.
Meanwhile, in today’s consolidating market, they’re down about 10% from their recent peak.
Chipotle has held up well in a rough environment for consumer spending. Revenues are up 14%, and earnings are up 23%.
While consumers may be cutting back, Chipotle may benefit from that trend compared to higher-priced offerings. That should allow shares to break their sideways trend to the higher side.
Action to take: Investors may like shares here in correction territory from their recent highs. Shares can likely resume their long-term uptrend in the months ahead.
For traders, the September $65 calls, last trading for about $2.40, could see mid-to-high double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.