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How to Trade McDonald's as It Hits New Highs

McDonald's is hitting new highs on Tuesday as investors continue to bid up the Golden Arches. Here's how to trade the stock now.

McDonald’s  (MCD) - Get McDonald's Corporation (MCD) Report was hitting an all-time high on Tuesday even as the stock market wavered during the trading session.

The picture is mixed in tech but not when it comes to old faithful and the Golden Arches.

The company has consistent growth, even though the coronavirus disrupted its operations earlier this year. Given the situation, it’s hard to imagine a company not being disrupted, though.

The focus isn’t on how much the company struggled in the first half of 2020, however. Instead it’s on the revenue and earnings rebound, the economic recovery and forward growth.

It doesn’t hurt that McDonald’s has raised its dividend for more than 40 consecutive years and kicks out a 2.2% yield. It also doesn’t hurt that the stock is hitting all-time highs.

Let’s look at the charts.

Trading McDonald’s

Daily chart of McDonald's stock.

Daily chart of McDonald's stock.

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In July, McDonald’s stock caught a spark of momentum. Shares jumped off the $185 level and quickly reclaimed the 200-day moving average. From there, McDonald’s found support at the 20-day moving average and eventually broke out over $200.

That move kickstarted a longer rally, as the 20-day moving average guided shares through the 2020 highs made in February and up to new highs in September.

While the rest of the market was struggling in early September - mainly thanks to tech - McDonald’s was holding steady. It wasn’t invincible, though. After a short setback, shares are back over the 20-day moving average and are now hitting new highs once again.

Can the momentum continue?

As long as the stock remains above the 20-day moving average, I think that momentum can continue. That’s particularly true if McDonald’s can continue to close north of $225.

Should shares continue higher, the 123.6% and 138.2% extensions come into play near $236 and $249, respectively. I’d love to see a rally up toward the latter.

On the downside, a break of the 20-day moving average puts September support near $215 in play, which hovers around the prior 2020 highs from February. The 50-day moving average is also nearby.

Below that and long-term bulls may love a chance to buy McDonald’s near $220.