McDonald's Corp. (MCD) has been trading sideways in a tighter and tighter trading range the past five months. Some market watchers and technical analysts might call it a triangle formation.
I tell my students at Baruch College that it is not that important what you call the price pattern but it is important that you decide where the formation is bullish or bearish. Normally a triangle-like formation in a rising market is bullish but when we look beneath the surface we do not see a bullish alignment of the indicators. Let's look closer.
In the daily bar chart of MCD, below, we can see that prices have moved sideways between $170 and $190, crossing above and below the 50-day moving average line several times. The volume pattern is not conclusive but the On-Balance-Volume (OBV) line shows a decline from November. A weakening OBV line tells me that sellers of MCD have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator has been crossing above and below the zero line since December and should be considered "neutral" at best.
In this weekly chart of MCD, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line is stalled the past three months while the MACD oscillator is in a take profits sell mode since December.
In this Point and Figure chart of MCD, below, we have mixed signals. Prices are in an uptrend with a $227 price target but we need a trade at $189.74 for a breakout. On the downside a decline to $175.22 will probably start to weaken this chart.
Bottom-line strategy: MCD was in an uptrend prior to this triangle formation so the assumption would be to anticipate higher prices ahead. However, the indicators are suggesting a downside breakout. Protect long positions and be prepared for the next move, up or down.
Will You Have Enough Money to Retire?
Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for $99 for this full-day event. Check out the agenda, learn about the speakers and sign up here.
