McDonald’s Corp (NYSE: MCD) seems to be gearing up for a surge as per its latest charts. McDonald’s Corporation operates and franchises McDonald’s restaurants in the United States and internationally. Its restaurants offer various food products and beverages, as well as a breakfast menu.
Bullish Indications
#1 Trend Channel: As you can see from the daily chart, the stock was trading within an uptrend channel for the past several months. This channel is marked on the chart in orange color. The stock currently looks poised for a breakout from this channel. This looks like a bullish indication.
MCD – Daily Chart
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 Above Support Area: The daily chart shows that the stock is currently trading above a long-term support area, which is marked as a pink color dotted line. This is a possible bullish sign.
#6 IH&S Breakout: As you can see from the weekly chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in purple color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.
MCD – Weekly Chart
#7 Bullish Aroon: The Aroon indicator denotes bullishness, as the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart.
#8 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of MCD above the price of $255.00.
TP: Our target prices are $268.00 and $275.00 in the next 3-6 months.
SL: To limit risk, place a stop loss at $248.00. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 5% to 8% in the next 3-6 months.
For a risk of $7.00, the target rewards are $13.00 and $20.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the uptrend channel and IH&S Pattern Breakout Level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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