McDonald’s, $MCD, moved up out of consolidation in August, stalling at a new all-time high in November. It pulled back quickly from there, finding support as it closed a gap from October, and over its 200 day SMA. Since then it has been moving higher. It paused as it retraced 61.8% of the drop and consolidated. At the end of last week it started higher again. A Measured Move would give a target to 187.50 or 192.50.
The RSI is on the edge of a move into the bullish zone with the MACD rising and positive, supporting more upside. The Bollinger Bands® are also opening to the upside. There is resistance at 187 and 188.75 then 190.88. Support lower comes at 182.25 and 179.25 then 177.60 and 174.75. Short interest is low under 1%. The stock pays a dividend with a 2.54% yield and went ex-dividend on November 30th. The company is expected to report earnings next on January 30th before the market opens.
The January 25 Expiry options chain shows the bulk of open interest on the put side and from 175 to 180, with the call side focused from 180 to 185. The February 1 Expiry, covering the earnings report, shows an expected $7 move by expiry. Open interest is biggest at the 195 call then the 182.50 call, with lower amounts on the put side. The February monthly options show the biggest open interest on the put side at 165 then 170 and 175. The call side is biggest at 190 then 195 and 200.
McDonald’s, Ticker: $MCD
Trade Idea 1: Buy the stock now (over 182.50) with a stop at 180.
Trade Idea 2: Buy the stock now (over 182.50) and add a February 1 Expiry 180/175 Put Spread ($1.40). Sell the February monthly 195 Call (47 cents) to lower the cost.
Trade Idea 3: Buy the February 1 Expiry 175/185 bullish Risk Reversal ($1.40).
Trade Idea 4: Buy the February 1 Expiry/February 190 Call Calendar (60 cents).
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with January Options Expiration behind and a long weekend ahead sees equity markets continuing to recover and looking strong.
Elsewhere look for Gold to pause in its uptrend while Crude Oil resumes the move higher. The US Dollar Index is showing short term strength while US Treasuries are biased to continue lower. The Shanghai Composite is also exhibiting short term strength and may be reversing higher while Emerging Markets continue to move up.
Volatility is back down to the lows since equities started to drop in October making the path higher the easier one for equities. The equity index ETF’s SPY, IWM and QQQ, are all responding well in both the short and intermediate term charts. But they all remain short of confirming reversals with a higher high and below their 200 day SMA’s. More work to be done. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.