McDonald's: Here's Why I'm Not Lovin It in 2023

This is what our review of the charts and indicators reveals.

McDonalds (MCD) is one of the most iconic brands around the world. I can remember the first McDonald's in my neighborhood back in central New Jersey in the late 1950's. Today we have the same yellow arches but lots of changes to the menu and prices are a big shock.

The local McDonald's three miles from my house in Delaware is pretty busy all day long but I suspect higher prices will begin to bite into traffic in the new year. This conclusion does not come from any fancy channel checks or surveys but from the price charts and technical indicators.

Let me show you what I'm seeing.

In the daily bar chart of MCD, below, I see a choppy sideways to slightly higher trading pattern the past year. The shares have slipped below the rising 50-day moving average line but remain above the rising 200-day moving average line.

The trading volume shows an increase from September and that is a little concerning. Active volume on the September decline (bearish) is followed by active volume on the October rally (bullish) and on the subsequent correction lower (bearish).

The On-Balance-Volume (OBV) line moved sideways from March to October and then only made a modest rally in November before rolling over. The movement in the OBV line does not show clear signs of aggressive buying and I find that to be a problem.

The Moving Average Convergence Divergence (MACD) oscillator is now moving below the zero line for an outright sell signal.

 

In the weekly Japanese candlestick chart of MCD, below, I see two trends. The first trend from the early 2020 low is very strong -- corrections largely stay above the rising 40-week moving average line and the OBV line rises smartly. The second trend is still up from late 2021 but there are troubling declines below the 40-week moving average line and the OBV line has declined. This second trend is certainly not as strong as the first.

 

The MACD oscillator made a lower high recently even though MCD made a higher high. This is a bearish divergence and tells us that the power of the advance is weakening. Two large upper shadows in early November and December are another sign that the uptrend may be in trouble as traders reject the highs.

 

 

In this daily Point and Figure chart of MCD, below, I can see an upside price target of $377 but a trade at $263.49 could start to weaken this chart.

 

 

In this weekly Point and Figure chart of MCD, below, I can see the same bullish price target but a weekly trade at $263.49 or lower will start to weaken things.

 

 

Bottom-line strategy: Too much salt, too many calories and maybe too many bearish divergences and upper shadows. Avoid the long side of MCD in 2023.

 

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