Chipotle shares are on fire this year, even as new health and safety worries plague the burrito chain.
The stock just posted its longest winning streak since January, pushing it to its highest level in more than a year, but one market watcher warns Chipotle's hot run could cool off.
"The short interest on the stock has come down dramatically over the last six to nine months," Miller Tabak strategist Matt Maley said Wednesday on CNBC's "Trading Nation." "You're not going to have that same kind of buying power that we had."
Chipotle currently has short interest at 9.5 percent of its overall float, below the 13.5 percent at the end of 2017. In 2006, it had short interest as high as 40 percent.
Higher short interest can lead to a short squeeze when a stock rises. Its gains force short sellers to buy up shares to cover their positions and avoid heavier losses.
Maley said Chipotle could still see a larger rally this year. If it clears near-term resistance, Maley sees its shares getting some needed momentum.
"The first time it tested a key resistance level was back in April when it moved up and broke above its trend line going back to 2015," Maley said. "We're going up against a new resistance level which is $500, which is the 2017 high, and if it can break above that, it'll give it a key higher high."
Chipotle came close to clearing $500 in May 2017, but failed to break through. The stock hasn't traded above that level since March 2016.
"If we do get a break above $500 I think it will be positive for the stock but I think the easy money has been made and I'd be a little bit careful on this one," said Maley.
Boris Schlossberg, managing director of FX strategy at BK Asset Management, is bullish on Chipotle and confident it can successfully tackle its food safety issues.
"The food issues are essentially a process issue. They will be able to ultimately eradicate it," Schlossberg told "Trading Nation." "The reason why the stock is so attractive is because its core value proposition which is taste and price still remains very much in place."
More than 600 customers complained of food-borne illnesses after eating at an Ohio Chipotle in late July. Recent cases of illness are reminiscent of its E.coli outbreak in late 2015 and early 2016.
