McDonalds Corp (NYSE: MCD) franchises and operates its restaurants in over 100 countries around the world. Its logo is one of the most recognized signs and most importantly for this column, the stock price has been moving in the right direction on the chart; from the lower left to upper right.
Before looking at the charts let me reiterate the difficulty and potential danger of technical stock picks during earnings season. As a principle I don’t buy and hold stocks through their earnings announcements because big moves in either direction are always possible if institutional investors don’t like what they see. I do however analyze stocks ahead of their earnings announcements. If post earnings the price action is still orderly and I like what I heard from the company, a higher probability setup should present itself. McDonalds Corp (NYSE: MCD) announces its earnings on July 22 before regular trading hours.
On the weekly chart looking back four years we see how nicely the stock has moved up in a channel since the spring of 2009. Besides being a cheap meal out for hungry customers and hence a welcome relief during the economic slowdown, the company is also profiting from the lower dollar because of its international sales.
On the daily chart looking back to October 2010 we see the stock price managed to pierce above and successfully re-test horizontal resistance around the $80 level in the May/June period and has rallied around 8% since. The most recent up-trend that started in March is firmly in place for now.
Zooming in closer still note the vertical leap of the stock in late June/early July, which of course was the broader market rally from the end of the second quarter. The stock has since consolidated (gray bubble) and looks poised to move higher. While aggressive investors may want to buy a breakout higher out of the consolidation phase, more risk-averse investors could wait for the stock to pull back to the blue up-trend line for better risk/reward. Stops could be set near $80 with profit targets around $100, but we need the earnings announcement to come to pass first.