In his "No-Huddle Offense" segment of Mad Money Wednesday night, Jim Cramer said the markets make tons of mistakes around earnings season. And when they do, investors need to have the courage to take the other side of the trade.
Shares of McDonald's Corp. (MCD) opened lower Wednesday, despite the company reporting stellar same-store sales, up 5% globally and 6% domestically. By the closing bell shares closed up 1.9%. Cramer said these gains were easier had by those who could see how undervalued McDonald's was.
Let's place our order and check the charts of this fast food giant.
In this daily bar chart of MCD, below, we can see that prices stalled out in August and September and corrected lower into early November. Prices have since recovered to within striking distance of the prior high and trade above the rising 50-day moving average line and the rising 200-day moving average line. Trading volume spiked at the early November nadir suggesting a selling climax.
The On-Balance-Volume (OBV) line has strengthened from early November and has made a new high for the move up, hopefully foreshadowing a new price high soon.
The Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in early January for an outright go long signal.
In this weekly bar chart of MCD, below, we can see that going long MCD has not been a bad investment the past three years. Prices are above the rising 40-week moving average line.
The weekly OBV line is in a long-term uptrend and close to making a new high for the move up.
The MACD oscillator just crossed back above the zero line for a fresh outright go long signal.
In this Point and Figure chart of MCD, below, we can see that a trade at $222.48 will be a new high for the move up and refresh the uptrend. A potential price target of $267 is being projected.
Bottom line strategy: The charts of MCD are positive. Traders and fast food junkies could go long MCD at current levels and above $222 risking a close below $205 for now. The $265 area is our next price target.