The weekly chart of Chipotle Mexican Grill (CMG) is starting to breakdown in a similar way that CROX broke down but the institutional numbers don’t support the down side as strongly as it did with CROX. The number of shares sold exceeded the number of shares bought by 46% when I highlighted CROX as a potential breakdown stock back in September in the post titled “Will CROX get Eaten?”

“Recent churning action below $60 per share shows that buyers are no longer in control of the stock. However, sellers haven’t completely gained control either. It is a tug-of-war between supply and demand as we await the ultimate direction of the next trend for the heavily covered Crocs Inc. (CROX).”

The difference here is that CMG has only recorded a 19% increase in shares sold versus shares bought which is not excessive. However, the stock has violated the 200-d moving average for the first time since the long up-trend started. We can also see the first violation of the relative strength versus the S&P 500 suggesting that the stock is no longer a leader and may fall victim to increased institutional selling.

Yes, the current fundamentals look strong but CMG posted a fourth-quarter profit that missed Wall Street’s expectations and said 2008 would remain challenging, raising some red flags in my opinion. They could be playing it cautious or they could be signaling the beginning of the end of this particular run.

The stock is 32% off of its all-time high and has been falling on increasing volume as it violated the long term moving average. I am not shorting at this spot but I will jump on puts about six months out on the first failed attempt to make new highs above the 200-d m.a.

Listen to what the Institutional Buyers are Saying (with their actions):
Total Held by Institutions: 386
Money Market: 182
Mutual Fund: 200
Other: 4

New Positions: 107
Positions Sold: 58
Shares Held: 29.28 mil
Shares Held Previous Period: 30.12 mil

Shares Bought: 4.31 mil
Shares Sold: 5.16 mil
Value of Shares Bought: $554.8 mil
Value of Shares Sold: $663.9 mi

• The number of shares held has decreased by 3%
• The number of shares sold exceeded the number of shares bought by 19%
• The value of shares sold was $109 million more than bought

It took a couple of months but CROX did get Swallowed and it all started with the small and subtle red flags that we are starting to see with CMG.

“I wrote a post titled Will CROX get Eaten? on September 20, 2007 and strongly noted the declining institutional support (see numbers below). Someone was jumping out of the stock and we now know why!”

“Stocks only churn when buyers and sellers are struggling to take control. More often than not, stocks churn because BIG institutions are selling shares to the small retail buyer (the sucker). Institutional numbers and charts that back them up don’t lie! The big boys can’t hide if you know how to read them.”