McDonald’s Corporation (NYSE: MCD) seems poised for a price surge as per its latest charts. The company operates and franchises restaurants under the McDonald’s brand in the United States and internationally. It offers food and beverages, including hamburgers and cheeseburgers, various chicken sandwiches, fries, shakes, desserts, sundaes, cookies, pies, soft drinks, coffee, and other beverages; and full or limited breakfast, as well as sells various other products during limited-time promotions.
Bullish Indications
#1 Downtrend Channel: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock is moving higher from the lower rail of the downtrend channel with high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
MCD – Daily Chart
#2 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#3 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#4 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
MCD – Weekly Chart
#5 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
#6 Bullish RSI: In the weekly chart, the RSI is currently moving higher from oversold levels. This is a possible bullish sign.
#7 Positive OBV: The weekly chart shows that the OBV indicator is currently rising. OBV rises when volume on up weeks outpaces volume on down weeks. A rising OBV typically reflects positive volume pressure that can lead to higher prices.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of MCD above the price of around $258.
TP: Our target prices are $266 and $274 in the next 3-6 months.
SL: To limit risk, place stop-loss at $253. Note that the stop-loss is on a closing basis.
Our target potential upside is 3% to 6% in the next 3 to 6 months.
For a risk of $5.00, our target rewards are $8.00 and $16.00. 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 from the trend channel with a high volume. 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 the sector.
Happy Trading!
Tara
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