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5 Big Stocks Set to Slingshot Higher

McDonald's

First up is fast food behemoth McDonald's (MCD - Get Report), a stock that's been getting shoved lower despite its positioning as a defensive name. Back in 2008, deteriorating economic conditions were a sales catalyst for McDonald's. In 2012, they've only helped to push shares 12% lower from the first trading day of January -- but that performance could be about to change.

Right now, McDonald's is forming a symmetrical triangle, a pattern that's formed by converging trend lines. The trading signal comes when MCD breaks through one of those trend lines, so if MCD pops above the upper trend line, traders have a buy signal. The symmetrical triangle is also sometimes called a coil because of the volatility properties it has; as the coil progresses, price action is getting constrained in a smaller range, and volatility is declining. Since volatility is cyclical, symmetrical triangles often get exited with big moves -- a good thing for traders looking for confirmation before buying.

>>8 Stocks to Help Keep the Bear Market at Bay

Typically, the symmetrical triangle is a continuation pattern. That means that the action following the pattern is usually a continuation of the price action that led up to the pattern (in this case, that has bearish connotations). But in my opinion, that's a dangerous way to get hamstrung about a trade before it even triggers.

Momentum, measured by 14-day RSI in this case, broke its downtrend last week. Since momentum is a leading indicator of price, McDonald's is favoring an upside breakout right now.

But I still wouldn't put a position on until the breakout actually happens.

I also featured McDonald's recently in " 4 Stocks the Pros Hate -- But You Should Love."

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MCD $96.80 0.38%
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