CMG: This Could be the Most Wicked Head & Shoulders Top Ever

by Dan November 22, 2011 10:33 am • Commentary

No Trade here,  just doing a little charting and CMG strikes me as a textbook head and shoulders top.

1 YR CMG chart from Bloomberg


With the neckline sitting at huge support of $300 and right above the 200 day moving avg of about $295, this chart sets up like a horror show if the there is a meaningful test of those levels for either company specific news or just general market weakness.

I don’t have a trade yet as near-term the stock is a little oversold down about 13% from the recent Oct highs, but still up 44% ytd!  With a $9 billion market cap trading at about 4.25 trailing 12 month sales and a forward PE of more than double their expected EPS growth next year this thing can easily be put in the “overvalued piece of crap” category in my trading portfolio.

But I want to be patient and either wait to sell on a rally, or press it when I think the market is about to really break.

Again I am not in the business of shorting stocks on valuation, especially ones with cult followings without a catalyst, but I will look to the options market to tactically placed near-term long premium bearish bets by defining my risk.

I may have to take this off the ‘banned’ list. So hold on to your Burrito because this one is coming to a theater near you, just trying to be patient.