Investors' voracious appetite for McDonald's (MCD) shares may be satisfied, as technical indications suggest the two-year rally in the stock is losing momentum. Several bearish technical diversions have developed on the daily chart, reflecting a shift in the direction of the trend and indicating the stock could be headed lower over the intermediate term.

Shares of McDonald's are up 65% over the last two years and 28% year-to-date, but over the last two months, there have been signs of turbulent price action and selling pressure.

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Daily moving average convergence/divergence, at the top of the chart, is overlaid on a weekly histogram of the oscillator, and it has been moving lower in bearish divergence to the stock price on both time frames. These readings reflect weakness in positive price momentum. The Chandre Trend Meter assigns a numerical value to a stock based on several technical indicators over six different time periods. It has dropped out of its upper ranges and is tracking lower, and the reading below the 60 level suggests the stock is in a weak downtrend. The accumulation/distribution line dropped below its 21-period signal average last month and has continued lower, a sign of distribution. Chaikin money flow has been declining for the last two months in bearish divergence to price and confirming the negative momentum indications.

McDonald's is currently testing support at its 50-day moving average and the uptrend line drawn off the lows of the last two months. The 50-day moving average has diverted from the 200-day moving average by nearly 12%, which is the highest level in the last 10 years. A break below the July low of $151.77 is a speculative short sale entry point, using a disciplined trailing percentage buy-to-cover stop.

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The author is an independent contributor and at the time of publication had no position in the stock mentioned.

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