McDonald's Is Looking Good -- Here's How to Trade It Now
Shares of McDonald's (MCD) - Get Report are surging today. The stock is the top gainer in the Dow Jones Industrial Average with a 1.75% gain. This news-inspired breakout move is leaving behind a very solid base that could supply the footing needed for a retest of the 52-week highs.
Ahead of next week's earnings report, due on July 27, investors should be very encouraged by this week's early action.
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Back in early May, McDonald's began to run out of steam after gaining nearly 15% off the February low. The pullback from the May 10 peak drove the stock down to major support near the 2015 highs. McDonald's held this key area, just above $120, until the Brexit flush wiped out this support zone. The stock fell another $3 before testing the 200-day moving average for the first time since September of last year. This important long-term indicator was able to limit further damage.
The powerful post-Brexit rebound showed signs of exhaustion last week as the stock neared heavy supply near the April low at $125. Today's impressive breakout-type move has cleared this level with ease while leaving behind a solid support zone in its wake.
In the near term, McDonald's bulls should consider the stock a low-risk buy between $126 and $124. This key area includes the January, February and June highs. On the downside, a close back below $123 would violate this week's low, indicating that a consolidation will be needed before a fresh bull leg can begin.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long MCD.