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3D Surface Plot of Returns: Upside Downside Price Pattern for Chipotle Mexican Grill

Investors and traders buy stocks on the price upside because most buy and sell combinations are profitable as prices rise. When prices rise rapidly in a short period, a bubble usually forms topped with an unsustainable peak followed by a price collapse where prices decline very rapidly.

The following 3D surface plot for Chipotle Mexican Grill (CMG) displays the pattern of monthly percent returns for the 8,911 returns based on 134 monthly closes from January 2006 through February 2017, a period in which prices rose steadily from January 2006 until they peaked in June 2015 forming a price upside. Prices then declined through February 2017.

Despite a 44% price decline from the peak through February 2017, 7,706 (86.48%) of all returns were profitable (green) and only 1,205 (13.52%) were unprofitable (red). The steep rise in prices on the nine-year upside ensured that most buy and sell returns would be profitable. The preponderance of profitable returns given a large number buy and sell combinations shows why investing in stocks on the long-term price upside produces wealth.

Note: Each return is computed using its unique buy and sell date and prices where percent return = ((Sell price - Buy Price) / Buy Price) * 100.

Interpreting the 3D Chart

The buy axis runs from the back (2006) to the front (2017) on the left side of the chart. The sell axis runs from left (2006) to right (2017) along the front of the chart. The buy axis and the sell axis form the floor of the chart. No trades can occur in the flat green area because the buy date is after the sell date or the sell date is before the buy date. The pattern of positive returns (green) looks like a mountain range whose elevations are directly proportional to the magnitude of the percent returns. The negative returns (red) lie below the floor and appear as shallow scooped-out valleys. The back left corner of the chart is the return for the first buy price and its first sell price.

Returns for specific buy dates are displayed as slices that run from left to right across sell dates. Returns for specific sell dates are displayed as slices that run from front to back across buy dates.

Back Edge Returns

The back edge of the chart displays 133 monthly returns for the January 2006 buy date starting with the February 2006 sell date return (back left corner) and ending with the January 2017 sell date return (back right corner). Read the monthly returns from left to right. All returns are profitable (green). These returns mirror the price path from the start to the end of the price series.

Right Edge Returns

The right edge of the chart displays 133 monthly returns for the January 2017 sell date starting with the January 2006 buy date return (back left corner) and ending with the January 2017 buy date return (front right corner). Some returns are profitable (green) and others are not (red).

Selling at the Peak Returns

The slice of returns with the highest return (1,462%) is in the center of the chart. The slice runs front to back. It displays profitable returns that result from buying at all buy prices before the July 2015 peak and selling at the peak. All returns are green for this slice. And most returns are green for sell dates just prior to and just after the peak date.

Buying at the Peak Returns

The large area of unprofitable returns (red) located on the front right of the chart results from buying at relative high prices associated with the July 2015 peak. For example, the slice of red returns that run from the peak sell date to the right edge of the chart result from buying at the peak and selling at subsequent lower prices. The surrounding red slices result from buying just prior to of just after the peak. The other two largest red areas result from buying at intermediate peaks.

Numerous Small Red Areas

The small red areas along the diagonal of the flat area represent short-term unprofitable returns.

Another View

Price Chart for CMG

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