Chipotle is at a ‘key juncture’ that shows the worst could be over soon: Strategist

Chipotle fell more than 2 percent on Wednesday following a downgrade from Bank of America, but the charts are suggesting that there might actually be a reprieve for the beaten-down stock.

"[Chipotle stock] is starting to form a base down at the $300 level," Matt Maley, equity strategist at Miller Tabak, said Wednesday on CNBC's "Power Lunch." "It tested that level back in August, again in September, again earlier this month in October, and it has held [that level] each time."

What's more, the stock is still trading above its 50-day moving average in spite of the negative sentiment on Wall Street, another positive sign, according to Maley.

"We're at a key juncture on a technical basis right now," explained the strategist. "If the stock continues to roll over and breaks meaningfully below $300, that's a big problem."

"However, if it can rally from here and break above its highs from last weekend at the $332 level, it's going to show that at least on a technical basis the worst might actually be behind it," he added.

That could be music to the ears of many Chipotle investors, who have watched the stock tank nearly 60 percent over the past two years thanks to a series of health scares.

But Gina Sanchez, CEO of Chantico Global, says the labor issue that led to the Bank of America downgrade is a legitimate concern for Chipotle. Bank of America essentially asserted on Wednesday that the chain will have trouble cutting back on labor costs.

"[Chipotle] is the most expensive stock right now relative to other similar companies like Jack in the Box, and they've obviously had some issues," she said. "This labor issue, however, is a real issue, and I would be looking at it."

The stock has plunged over 35 percent since hitting year-to-date highs mid-May.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more