When a Favorite Falls from Grace

One may think of Apple (AAPL) and Chipotle (CMG) as stocks, and companies, that have little in common.     But the one major theme that binds them is that they were favorites.  In 2012 their respective stocks were favored at times showing considerable relative strength to the general market.  Chipotle was propelled to $440 per share in April 2012, a 57% gain over the year earlier.  Apple saw its high-water mark five months later when it closed at $702 per share; that represented a 71% gain in a year's time.

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Setting each stock on a 100-point index, at their highest point makes for an interesting comparison.

There have been 96 trading days since Apple crested at $702, as it closed today (Feb. 7, 2013) at $468, that puts the Apple Index at 66.69.  That compares incredibly similar to Chipotle's 96th trading day when it measured 66.77 on its 100-point scale.

Their methods to sell of one-third of their valuation have not been alike.  The graph above shows the Apple decline much more linear while Chipotle has had more volatility.

Given the five month head start Chipotle has on its meltdown, it now can provide a five month forward-looking rebound for Apple shareholders.  Chipotle incurred a wide range of prices after its first 96 days of correction.  It would imply of range for Apple of $380-$555 if Apple experienced the same type of volatility.  If Apple skips the drama and find a bottom in the next 40 trading days, then it could be expected to start trending its way about 70 on the index.  That would mean a price near $500 in July 2013; not significantly higher than it is today, but when and where the bottom is put in will be the interesting story.

The similar nature in the way the companies delight their customers, have executed well and are on solid financial footing seems to lend credence in watching Chipotle to predict what Apple might encounter.