A major sell-side firm has put McDonald's Corp (MCD) on a "negative catalyst watch" and lowered their price target for the fast food giant to $246 from $275. Let's check the charts to see what's going on there.
In the daily bar chart of MCD, below, we can see that the shares have weakened from the middle of August. MCD has broken down below the 50-day and the 200-day moving averages. The slopes of both indicators have turned negative.
The On-Balance-Volume (OBV) line has weakened from August telling us that traders are now more aggressive sellers. The trend-following Moving Average Convergence Divergence (MACD) oscillator has fallen below the zero line for a fresh outright sell signal.
In the weekly Japanese candlestick chart of MCD, below, we can see the past three years of price movement. MCD was in a longer-term uptrend from early 2020 to late 2021 when the trend turned sideways. The sideways trend has grown old and prices are now trading below the declining 40-week moving average line.
The OBV line has been weakening since October 2021 and tells us that there has been a significant amount of liquidation (selling). The MACD oscillator has crossed to the downside from a lower high versus the January high -- this is a bearish divergence when compared to the price action showing equal highs.
In this daily Point and Figure chart of MCD, below, we can see a downside price target in the $239 area.
In this weekly Point and Figure chart of MCD, below, we can see the same down side price target of $239-$238 area.
Bottom-line strategy: The downside price targets currently for MCD on the two Point and Figure charts, above, are not terrible but they mean that the stock could retest its June low and one never knows whether the prior low will hold or break. I would remain defensive on MCD shares.
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