The last time we wrote about fast casual restaurant chain Chipotle Mexican Grill was more than five years ago. On February 17th, 2020, a complete five-wave impulse pattern on its 4-hour chart warned us that a notable correction was just around the corner. In yet another example of Elliott Wave analysis somehow predicting the market’s reaction to otherwise totally unpredictable events, that correction coincided with the Covid-19 crash of March, 2020.
It felt as if the world was ending at the time, so understandably, the support of wave (4) couldn’t stop the bears and the correction was much deeper than initially expected. The world didn’t end, however, and the Fed and Treasury soon put more than enough money into everyone’s pocket to ensure a quick recovery. The fact that Chipotle is actually a great business also helped. Its uptrend resumed and eventually propelled the stock to over $69 a share in June, 2024, up 735% from its Covid bottom at $8.30.
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In the ten months since that 2024 all-time high, however, Chipotle stock has declined by more than a third to around $45. Multiple contraction seems to be the only reason for this pullback, since there is no apparent fundamental problem at the company. Sales, profits and the number of stores continue to grow, supported by what looks like a fortress balance sheet. Is the recent weakness a buying opportunity then? It appears so.
As visible, the current decline fits in the position of wave IV of the five-wave impulse, which has been in progress since 2009. We’ve labeled the pattern I-II-III-IV-V, where the five sub-waves of wave III are also visible. In fact, the structure of wave (5) of III can also be recognized as an impulse, marked 1-2-3-4-5, where wave 5 is extended.
The current fourth wave is a simple a-b-c zigzag correction, whose wave ‘c’ is already touching the 38.2% Fibonacci support, where fourth waves usually end. If this count is correct, we can expect the uptrend to resume in wave V towards $80 a share, before the pattern that began in 2009 is complete. Then, an even bigger bear market would make sense, since a three-wave correction follows every impulse.
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