I’ve been following the NYSE:MCD (McDonald’s Corporation) since last year for multiple reasons I’ll be explaining in this write up.
This post was actually planned to be published last week (screenshot below is taken on last Sunday) but being the usual me, I’ve forgotten to post it up. So here comes my technical analysis take on this global fast food chain.
1. POWERFUL BREAKOUT
Firstly, what attracted me to this stock is the strength of the breakout which can be seen between Mid-2015 to Start-2016. It shows a non-hesitating vertical push breaking the strong $100 price level, which happens to be both a 4-year resistance level and a psychological round number. This inevitably shows the strength of the breakout of this level due to whatever reason, which is a very good sign that it will continue creating a higher decade high. Again for the record and new readers, as a technical trend trader, I do not rely my key decisions based on any news or fundamentals.
2. CONSOLIDATION BROKEN
A broadly used principle every technical traders will know is “The longer the period of consolidation, the stronger the eventual breakout will be“. Some even say a five year consolidation means a five year rally, etc. As much as they’re proven time and time again to work, they are only theories and definitely can never predict the peak of the breakout. So my second reason why this stock is attractive is because of its 4-year consolidation breakout, from Mid-2011 to Mid-2015. This strongly suggests the volume of buyers realising the potential McDonald’s Corporation. Fyi, some reading on NYSE:MCD will show that McDonald’s main competitors are dying down in providing value (from new lawsuits to worsening consumer value, etc.).
3. DOJI WEEKLY BAR
The Doji created on the latest weekly bar (11 Jan 16) is a definite sign of neutral bias based on price action theories, also considered a small consolidation within that week before it can finally chooses to either continue with the main trend or not. Trend is a trader’s best friend; so odds of profiting are with the buyer from this level instead of shorters here.
4. RETRACEMENT WEAKNESS
Weakness in the retracement will show that it won’t last for long. From what I see in this current McDonald’s chart, it is more of a retracement than a correction/reversal, and even so a weak one. It can be said so as first off, it does not even try to get near the 23.6% Fibonacci retracement level before creating a doji pattern (explained in point 3). Second, it is creating a higher low within the daily chart (try imagine what is happening on the Daily chart in the past week based on doji price action alone). Third, it is most likely an retracement due to the psychological round number (yes again important) at price point $120 acting like a resistance level when in fact, it is just a psychological area most of the time. Thus it can be said that there is no sign that NYSE:MCD will reverse from its rally from here just yet.
5. BREAKING $120
So first you missed the breakout of this stock’s 4-years consolidation on 12 Oct 2015 @ $104. Then you missed the small retracement breakout on 30 Nov 2015 @ $115. Now it is at $118.
If you’re asking me how you can gain from this global food chain brand, or is there even any potential left for this stock? The simple answer is yes, this stock still has substantial value and potential to spike higher. I’ve always believe in letting the market does its thing and not predict any high point; Respect the market and it will respect you.
If you’re considering to own part from this food chain business now, I will recommend you to wait it out. Wait for a definite confirmation of Trend continuation. The simplest way to confirm the continuation is when it breaks and close above the high of $120.3 where the principle of Higher High, Higher Low surpasses any other price action theories.
For those who wants a brief overall summary of Fundamentals + Technical review on this stock can check out article McDonald’s Corporation High Stock Returns To Continue from BusinessFinanceNews.com for a quick read.
Otherwise, I greatly appreciate it if you’ll leave your thoughts on my technical review of McDonald’s Corporation in the comments section below. Thank you! 😀
The Independent Abecedarian