Shares of McDonald’s Corporation (NYSE:MCD) only recently managed to push into the green for 2016. And when you look at MCD stock through a multi-week technical lens, you’ll recognize that shares are eyeing a well-defined upside target that traders could look to sink their teeth into.
Before looking at the McDonald’s charts, let me once more remind you that while the prospects for the so-called ‘Santa Claus’ rally over the next week or so are real, so too are the prospects of a quieter and possibly choppier stock market.
From a trading perspective, this means that less is more and that price targets and generally the expectations for meaningful directional moves in stocks should be conservative. From a technical perceptive, as we will see on the charts below, it thus helps to have well-defined price targets and stop-losses that need too much outside influence to be reached.
McDonald’s is set to report its next batch of earnings on Jan. 23; the trade I describe below is something I will want to be out of before this earnings date.
MCD Stock Charts
From a news perspective, earlier this week on Tuesday, December 20 Credit Suisse reiterated its Outperform rating and a $128 price target for MCD stock. The company thinks that among other things, the all-day breakfast initiative will continue to provide tailwinds for both the top and bottom line and also sees a new business friendly administration under Mr. Trump as a positive for McDonald’s.
Looking at the multi-year weekly chart, we see that from 2012 through September 2015 MCD stock was stuck below well-defined horizontal resistance around the $102.50-mark. However, in October 2015, McDonald’s stock staged a major breakout that lasted right into May 2016. MCD stock then corrected about 15% into October of this year, where the stock found support by its blue 100-week simple moving average.
The rally since has also broken McDonald’s stock out of what could be seen as a bull flag pattern when looked at through a multi-year lens. This in turn, would justify the argument for higher prices through a six- to twelve-month lens.
Because of the strong multi-week rally, we see on the daily chart we see that MCD stock now has its yellow 50-day moving average marginally piercing above its blue 100-day moving average and that the stock is trading above those moving averages.
While this is only a recent development, if this trend can continue it would add further technical bullish validation to the McDonald’s story in my eyes. Over the last few days, MCD stock has consolidated right at the lower end of the down-gap from July 26, which I marked on the chart with the blue box.
From here, barring any major bearish reversal, when you look at McDonald’s stock through a multi-week lens, it looks to fill in this gap around $128. Traders could look to buy MCD stock upon the next bullish push into this blue box, i.e., the unfilled gap.
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