McDonald’s, $MCD, started to move higher in November 2016 and continued to a top in January 2018. Over that time it rose over 60%. The pullback retraced more than 38.2% of the move higher and it bounced. It proceeded to consolidate after that for the next 7 months. Since the beginning of August it has been moving higher in that consolidation and is now approaching the June high. Over that could be the making of a reversal.
The RSI is rising and in the bullish zone with the MACD crossed up, rising and positive. The Bollinger Bands® have also shifted higher. There is resistance at 169.50 and 171.50 then 173.50 and 178.70. Support lower comes at 165.60 and 162 then 159 and 155. Short interest is low under 1%. The company is expected to report earnings next on October 22nd. The stock pays a 2.77% dividend and starts trading ex-dividend November 30th.
The October options chain shows the largest open interest at the 175 Call Strike and spread from 160 to 175. On the Put side it is smaller and focused from 155 to 165. The October 26 Expiry options, the first to include the earnings date, are building but show the biggest open interest at the 170 and 172.50 Call strikes. The November option chain has the biggest open interest at the 170 Call and then from 160 to 165 on the Put side.
Trade Idea 1: Buy the stock on a move over 169.50 with a stop at 165.
Trade Idea 2: Buy the stock on a move over 169.50 and add an October 26 Expiry 167.50/162.50 Put Spread ($2.00) for protection through earnings, and sell the December 180 Calls ($1.00) to reduce the cost.
Trade Idea 3: Buy the October 26 Expiry/November 175 Call Calendar ($0.70) and sell the October 160 Puts (35 cents) to lower the cost.
Trade Idea 4: Buy the November 160/170/175 Call Spread Risk Reversal (90 cents, buying 170/175 Call Spread and selling 160 Put).
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 as the books are closed on the 3rd Quarter, sees the equity markets taking a breather after making recent new highs.
Elsewhere look for Gold to continue lower in its downtrend while Crude Oil drives higher. The US Dollar Index may be ready to reverse higher while US Treasuries have bounced again at support and are now rising. The Shanghai Composite is also building a possible reversal higher while Emerging Markets continue to fall in a channel.
Volatility looks to remain very low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show digestive behavior, with sideways or slight pullbacks on the longer timeframe. On the shorter timeframe there has been continued rotation, now into the QQQ as the SPY pauses with the IWM still lagging. 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.