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July 30, 2023 | First Big Correction of 2023 Has a Ways to Go

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

My ‘Chipotle indicator’ suggests that CMG, along with other high-fliers and the broad averages, could fall by at least 27% from recent highs before the bull market resumes later this summer. We last visited the burrito vendor’s chart in early May, just after a short-squeeze powered by feverish buying speared the red line, a ‘midpoint Hidden Pivot’ resistance at 1968. This stood to be a formidable impediment, especially since it closely coincided with the structural resistance of a key high at 1958 recorded 19 months earlier. But buyers, mostly bears scrambling to cover bets against the stock that were exploding in their faces, gutted the resistance with ease, managing to hold the stock effortlessly aloft for three months. Last week, however, it dove through the line in a shakeout that was stage-managed just as effectively as the gaseous rally. DaBoyz evidently had decided there was not sufficient buying power to keep the stock moving sideways indefinitely, so they pulled their bids, letting it plummet toward levels where they eventually will be able to accumulate shares once again with a thimble-rigger’s confidence.

A High-Odds Bet 

If the selling should exhaust itself near the green line at $1582, that would trigger what in Hidden Pivot parlance is called a ‘mechanical’ buy. As longtime subscribers to Rick’s Picks could attest, such bets seldom lose when they follow steep, powerful rallies such as the one that occurred in this stock during the peak covid years 2020-21. Ordinarily, we should expect the rally to reach the ‘D’ target at 2739. Stocks nearly always achieve ‘D’ when the midpoint pivot, in this case 1968, has gotten shredded on first contact.  Assuming Chipotle eventually hits its mark, the bull market in stocks would have significantly higher to go, since CMG and a handful of other world-beaters would pull the broad averages higher in sympathy. The bounce would be all but certain to reach p in my estimation, but I would no longer regard more upside to p2, let alone to D=2739, as a sure thing. I still view a finishing stoke to D as no worse than an even bet, however, in part because the ‘no recession!’ story has only just begun to percolate into the simian brains of portfolio managers and to entice the usual bozos into buying heedlessly.

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July 30th, 2023

Posted In: Rick's Picks

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