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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.

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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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