McDonald's Bulls Are Lovin' It: What's Next For The Stock?

McDonald’s Corporation MCD made a new all-time high of $239.69 on Thursday. Traders and investors may be anticipating the fast-food chain steamrolls analyst estimates again when it prints its second-quarter earnings July 28.

When McDonald’s printed its first-quarter earnings on April 29, a number of analysts raised their price targets for the stock. The company reported revenue of $5.1 billion, which beat the consensus estimate of $5 billion and earnings per share of $1.92, which beat the estimate of $1.81.

On July 16, ahead of McDonald’s second-quarter results, Wedbush maintained its Outperform rating and raised its price target to $265. McDonald’s stock still has a way to go before reaching the analyst’s target price but with no resistance in blue skies, in the form of price history, the stock could really fly.

It should be noted, however, that holding stock or options through an earnings event is risky, because a stock can drop if the company prints an earnings beat and rise on a miss. If the stock runs up into earnings it is more likely to become a "sell-the-news" event regardless of what the company reports.

The McDonalds Chart: McDonald’s made a new all-time high of $239.05 on July 14 but failed to get any form of follow through. The stock then retraced over 5% before bouncing off a support area at $226.40 on Monday. Thursday’s close above the $238 level also put McDonald’s firmly above the sideways trading pattern the stock has been stuck in since April 5.

Even though McDonald’s shut up almost 6% between Tuesday and Thursday its relative strength index is still registering at a comfortable 59%. This indicates McDonald’s could move up quite a bit higher before running into overbought territory.

McDonald's stock is trading above both the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day EMA, both of which are a good sign for the bulls in the shorter term. McDonald’s is also trading well above the 200-day simple moving average which indicates overall sentiment in the stock is bullish for the longer term.

McDonald’s is not extended from any of its moving averages which, like the RSI, indicates the stock could run much further.

Bulls want to see sustained momentum, in the form of increasing bullish volume, push McDonald’s stock up to make another new all-time high. Although consolidation will be needed along the way, McDonald’s could continue to run up into its earnings print.

Bears want to see bearish volume come in and knock McDonald’s stock back into the sideways channel. If McDonald’s trades back under the $237 level it could retest support at $231. Below that it has support at the bottom of the sideways channel at $226.40.

MCD Price Action: McDonald’s was trading up .9% to 240.68 at publication time.

Photo: Polina Tankilevitch from Pexels