McDonald long term view through technical analysis August 25, 2016

Company Profile

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McDonald’s is the world’s leading global food service retailer with over 36,000 locations in over 100 countries. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business men and women.


Long-term Outlook

MCD Monthly 25 August 2016

The first chart we want to view is the Monthly chart, and blue uptrend line spotted quickly without much effort in the monthly chart. Every time the shares fell into the trend line, it always bounced back McDonald higher. There is another thing which is evident also since 2011 – 2015 price moving inside box range spanned between $87 – $105. Nearing end of 2015 it suddenly jumped and blast the top of box resistance, price continues up and never returned to test the broken range.

MCD Monthly 25 August 2016-2

Zooming in the chart, we drew Fibonacci level from the swing low of the recent rally move to the record high. On the chart, there is a confluence of support level with Fibonacci level which formed support area between $100 – $115. A drop in price should stall at this area and $100 round number is a great area to add a long position.

MCD already feel for three consecutive months, and August candle looks to add streak to the losses.

Weekly chart

MCD Weekly Chart 25 August 2016

While the downside is limited, fortunately, MCD trip below support trend line. This close below trend line should trigger more selling, testing the confluence area shown in the Monthly chart.

You may ask why this is fortunate? The cause is, in the first breakout move above $100, not many conservative traders could catch the movement, getting MCD at $100 presented us with better risk-reward ratio compared to obtaining it at $120 should MCD continue its up move to $120 we will enjoy a gain of 40% compared to 20% increase from $120.

As long as no extreme demographic change in the customer, MCD will survive the market and keep performing well.

Daily Chart

MCD Daily 25 August 2016

On Daily chart, we add Simple moving average indicator with 200 periods. Fortunately, again, MCD fell below its SMA 200. Short term trader will avoid this shares like disease should it fall further, keep in mind one of Buffet’s quote:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

Wait for lower level support and keep buying when everyone is dumping this blue chip company.

Strategies we can adopt

  • Buy shares when it touches $115, $110, $100, target average of $105.
  • Selling put with strike level $115, $110, $100 collecting premium if the price never touches that level.
  • Covered call with call strike at $130 and share price between $100 – $115.

Note: Analysis made in this post done through observation of supply and demand level in McDonald’s shares. A complete analysis through a fundamental side of view will be published shortly.

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