Why This Expert Thinks McDonald's Is 'Really Shaping Up To Be A Monster'

Eagle Bay Capital founder and Market Technician JC Parets tracks the performance of the Dow 30 stocks, analyzing the companies every week.

In his most recent Dow 30 report, the expert takes a look at McDonald's Corporation MCD, which he sees “really shaping up to be a monster” in the bigger picture.

Weekly Chart

Structurally, Eagle Bay has been neutral on McDonald's, waiting for (or hoping for) some consolidation around the 200-week moving average, which coincides with the February lows. “Also with momentum putting in a bearish divergence at this year's highs, overhead supply from broken trendline resistance and relative strength still in a strong downtrend,” Parets believes a more neutral stance is best. The expert still thinks a tactical approach would be better than a structural one.

“The recent developments, however, are positive and a 4th test of this overhead supply from since 2011 would argue for an ultimate breakout to new all-time highs that we want to be buyers of,” he adds.

Daily Chart

Short-term, momentum is giving mixed signals. So, the firm has preferred  to stay away from McDonald's, “particularly with a downward sloping 200 day.”  Eagle Bay said that “a bullish development would be a breakout above 97.50” and the stock got there last month.

Parets says he would be “a buyer of weakness but only above the December highs.” He explains, “The next target is last year’s highs just under 104, but I would much rather be in this name once the 200 day turns up. It is hard for a sustained rally with this much downside pressure driven by that declining 200 day.”

The firm only wants to be in this above the highs from December and above a rising 200 day. However, both these conditions are not currently met.

Bottom Line

As stated above, “McDonald's is a stock that bigger picture is really shaping up to be a monster.” Eagle Bay has tested this level just over $100 in three separate occasions over the past few years.

“I think another test is coming soon and ultimately we break through and explode higher. But more tactically we've been patient waiting for thing to develop,” Parets explicates. “I love how the 200 day moving average is starting to slope higher and I would either be a buyer of dips down under 96 or on a sustained breakout above the downtrend line from the early March highs.”