McDonald's Gets Closer to Our Price Target

 | Jul 26, 2017 | 8:37 AM EDT
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McDonald's Corp. (MCD) gaped higher Tuesday to post a new high, with an increase in volume compared to recent weeks. Prices closed near the highs of the day -- all good -- and this kind of action foreshadows further near-term gains.

Prices have also traveled a long way from their 2014-2015 consolidation around $95 per share. A long-term Point and Figure price objective has been met and exceeded. More "creative" price targets measure to the $250 area. Thinking longer-term, a different kind of review may be in order. Thinking outside the bun?

In this daily bar chart of MCD, above, we can see how prices turned up in November and then again in late January. A runaway or measuring gap can be seen in late April around $135. Prices rallied from $110 to $135 or $25 and adding $25 to the $137 (the start of the next move up) gives us $162. Just about where we are now.

Notice how prices dipped on Monday to retest the rising 50-day moving average line? Yesterday was an up day for the On-Balance-Volume (OBV) line, after a number of weeks of rolling over. The Moving Average Convergence Divergence (MACD) oscillator was in a defensive mode since late May, but Tuesday's strength is likely to turn the oscillator positive again.

In this weekly bar chart of MCD, above, we can see two strong advances separated by a six-month correction. This pattern might be considered a measured move or an A/B move. I consider this pattern relatively rare and not too useful. By the time one typically recognizes this kind of chart construction, the pattern is around 80% complete.

MCD is above the rising 40-week moving average line -- maybe too far above it. The weekly OBV line is overall positive. The MACD oscillator on this timeframe was narrowing towards a take profits sell signal, but that may be pushed off with the current strength.

In this Point and Figure chart of MCD, above, we can see that prices have nearly doubled, plus a $146 price target has been met and exceeded.

Bottom line: in our last review of MCD on April 3 we looked for "gains to around $171" and right now that isn't far off. In April I suggested stops below $124, and now I would risk below $147.

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