Who would have thought that McDonald's (MCD) would be one of the best performing Dow stocks in 2015? Not me, and probably not many of you. But if you caught the McDonald's wave, kudos. If you didn't, keep reading to see my take on where the stock can go from here.
Ever since it reported stellar earnings and reminded shareholders of its promising turnaround story, McDonald's has been increasing in a narrow price channel. Relative strength has been very strong and the On Balance Volume has been trending higher.
The recent market blood baths have brought McDonald's back to the bottom, upward sloping line of support for the first time in a few weeks. Yesterday's selling pressure created a nice hammer doji that closed above the support line (the penultimate candlestick on the chart above), which tells me that the trend is still strongly intact.
Given the recent market volatility that could prove to be the theme of 2016, I think you can't go wrong with a low beta name like McDonald's. (Low beta means that relative to the broader markets, the stock trades at or below the percentage gain or loss. For example, if the market is down 1%, McDonald's may be down 1.1-1.3%).
If you've been looking for the opportunity to invest in McDonald's, you may have just gotten your chance. As for a trade, I think that you can buy the stock with a tight stop at around $116, which would signal a violation of the current trend. TLDR (Too Long Didn't Read): McDonald's is in a strong, upward sloping price channel and has held support strongly. If you've been looking to buy the stock, I recommend it given its low beta; if you would rather trade the stock, have a tight stop at $116.
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