Skip to main content

McDonald's (MCD) - Get McDonald's Corporation Report  was lower Tuesday, falling 3.1% to $203.43 after a disappointing earnings report.

The stock has been under pressure since hitting its 52-week high in early August. Valuation concerns continue to weigh on investors as McDonald's searches for growth.

Earnings of $2.11 a share missed analysts' expectations by 10 cents, while revenue of $5.43 billion grew 1.1% year over year but missed estimates by $40 million. That said, global comp-store sales were up 5.9%, beating estimates of 5.5% growth.

Business is going well for McDonald's but investors were looking for a catalyst to bid the stock higher. Even though global comps came in strong, a top- and bottom-line miss isn't the momentum booster that bulls needed.

The underwhelming earnings results coupled with an already depressed stock price makes McDonald's a tasty appetizer for Real Money's Stock of the Day.

Let's look at the charts while we're at it.

Trading McDonald's Stock

Image placeholder title

McDonald's topped out at $221.93 in early August. A decline of 10% would land the stock at $199.73. Round it up to a whole number and psychologically important mark and we get $200.

Just above that mark now, MCD stock doesn't have far to go to get there. But it's more than just a ~10% decline.

At $200.64 we have the 61.8% retracement for the one-year range. Just below, at roughly $199, we have the 200-day moving average. Near current levels we also have channel support (blue line), although McDonald's stock has overshot this mark before.

Scroll to Continue

TheStreet Recommends

Further, landing MCD stock at $200 per share puts the dividend yield at an even 2.5%.

There's plenty of reasons to want to buy McDonald's at $200. The question now becomes, can McDonald's stock fall there and will $200 act as support should the stock get to this mark?

Just over $3 per share from the $200 level now, MCD stock can most definitely fall to this point. It could get there by lunch if bulls start to throw in the towel. Whether it holds is a more difficult question.

At the very least, it's a solid risk/reward mark. Below the 200-day moving average and investors can always stop out of their long position. If investors are in it for the long haul, perhaps $200 represents a reasonable level to nibble the stock. If they're only traders, they will want to limit their risk should the 200-day moving average fail as support.

Below the 200-day and the 50% retracement comes into play near $194. Below that and the 38.2% retracement rests down near $187.50.

On the upside, see if MCD stock can reclaim the 78.6% retracement at $210 and the 100-day moving average. The latter was prior support but is now acting as current resistance. Over this area could propel shares back toward its highs. 

Save 57% during our Halloween Sale.

Don't let this market haunt you and join Jim Cramer's Investment Club, Action Alerts PLUS.

Click here to sign up


This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.