MCD, McDonalds Corp.

mcd oct 26 2018 bmcd oct 26 2018 s

From the 2003 low near $10 one can count a 5-wave sequence into the Feb.  top earlier this year. Arguable it might not be complete as yet but the RSI is at a level that is roughly equal to the earlier top and is already at an extreme valuation. Furthermore with a p/e at 26x or so, double the “normal” level historically, this thing is ripe for a big adjustment.

    In any event, even if not yet entirely complete, the first target is at about $90 which constitutes a decline of about 50%, not a bad setup for a trade.

MCD update

The usual, December 2015 and now charts;

mcd dec 28 2015mcd feb 22 2016

The “thrust” corresponds to the size of the mouth of this, four year, triangle. Whatever the count (see previous blog) the first move should be back to the low point of the triangle which is about $80. That would represent a $40 drop, or around 30%. It should not take much longer than a year, the same time it took for the thrust to develop. A good short by way of options. For instance, a 100 Jan. 2017 put, which can be bought for about $4, should be worth >$20 if this happens. That is 5X. Call your broker and see how that goes over! He or she will resist and try to talk you out of it. Just explain that it is actually a lot safer to buy a put for relatively little money than to either own, or short, the full amount of the stock. This is because the outlay for the option in this example is just a little over 3%.

Here is the bigger picture;

mcd feb 22 2016 b

MCD update

mcd dec 28 2015 bmcd dec 28 2015

Back in 2012 with the stock hitting the big $100 level we did think that it was a sell.  For four years after that it did trade, on average, lower than that but recently it decided to shoot up almost vertically in a $30 “thrust”.  If that is the correct interpretation those four years probable were a triangle but, possible, just an elongated a-b-c wave 4 (in pink).

     In this count wave 3 is the extended wave and therefore there is a high probability that waves 1 and 5 will tend towards equality leaving very little room to rise further. The mouth of the triangle measure suggests that it has already peaked. My gap-in-the-middle approach would allow for a few dollars higher, but then the channel is just fine with the present top. This is a short and a short now!

     Fundamentally, if you are old enough, you will remember the days  that you filled up the  gas guzzling Ford LTD stationwagon AND treated the little ones on french fries etc. all out of a $20 bill and still got change back. Not anymore. These fastfood people are pricing themselves out of the market and once people realize that potatoes and salt with sugar water added to flush it down are overpriced and not very healthy the stock will come down fast.

MCD, The hamburger joint, update.

mcd dec 2011 bigchartsmcd oct 2012

The Bigchart on the left dates back to the 18th of December 2011. The chart on the right is as of today. The stock peaked in January at about $100. It has taken all this time to do wave 1 down and an a-b-c rebound in wave 2, precisely to the Fibo 61% level. The drop over the past day or two is the start of wave 3. The first target is at around $45 but much lower possibilities lie beyond that. If you bought the recommended put at that time you have lost about 1/2 of your money but you will soon cross over the strike price a second time and there are at least 3 months left to expiry! Buy more ?