Hurry and Eat Up McDonald's Stock

 | Nov 14, 2017 | 9:27 AM EST
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McDonald's Corp. (MCD) was reviewed at the beginning of November, and we concluded our analysis with these thoughts: "MCD has been able to stay on top of the fickle world of fast food. The charts and indicators are bullish. Continue to hold longs, raising sell stops to $155 and looking for $180 and then $200 on the upside. Our ambitious Point-and-Figure target of $279 will have to wait a while."

In the past two weeks, MCD has dipped a little, but is still above the rising 50-day moving average line. Our recommended sell stops at $155 have not been touched, and minor support around $165 can be seen. Has anything else developed on the charts or with the indicators? Let's check.

In this daily bar chart of MCD, above, we can see that the uptrend is still intact -- higher highs and higher lows. Prices are above the rising 50-day and the rising 200-day moving averages. The volume picture raises a flag this month, as prices made a new high, but volume did expand.

The same divergence can be seen in the On-Balance-Volume (OBV) line, which has not (yet) moved above its July high. In the bottom panel is the 12-day momentum study, which shows a small bearish divergence in October and November. As prices made higher highs, the momentum indicator made lower highs, telling us that momentum slowed.

In this weekly bar chart of MCD, above, we can see that prices are above the rising 40-week moving average line, so we know the long-term trend is up. The pattern of volume shows a long decline, and the weekly OBV line shows a peak three months ago, while prices have continued higher.

In the bottom panel we can see that price momentum has slowed from June/July to October/November despite the higher prices during the same time period. This is a significant bearish divergence and could foreshadow a long period of sideways price action.

In this Point and Figure chart of MCD, above, we can see a long uptrend and no distribution patterns. However, prices are extended. A pullback to the upper $150s is possible.

Bottom line: the uptrend in MCD is still ongoing, and prices could ignore the divergences from the OBV line and the momentum indicator -- so, for me, it comes down to strategy. I would continue to hold longs, risking to $155. $180 and $200 remain our price targets.

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