McDonald's Corporation (MCD) reported quarterly earnings results on Jan. 30 with better-than-expected earnings per share. The stock traded higher but then reversed direction as the chart patterns deteriorated. After trading as high as $187.79 on Jan. 30, McDonald's stock dropped by 6.5% to a low of $175.66 set on Monday, Feb. 4. This low was just above my weekly value level at $175.63.

The fast food giant's stock closed Tuesday, Feb. 5, at $177.57, unchanged year to date and up just 5% from its Dec. 26 low of $169.04. The stock is 7% below its all-time intraday high of $190.88 set on Nov. 29. I view the Nov. 29 high and the Jan. 25 high of $189.42 as a potential double top.

McDonald's is arguably the most popular fast food franchise in the world today. The maker of the Big Mac is a component of the Dow Jones Industrial Average, but the stock is not cheap, with a P/E ratio of 22.62 and a dividend yield of 2.78% according to Macrotrends.

The daily chart for McDonald's

Daily technical chart showing the share price performance of McDonald's Corporation (MCD)
MetaStock Xenith

McDonald's stock has been above a "golden cross" since Oct. 16, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices would follow. The stock rose by 16% from $164.07 on Oct. 16 to its all-time intraday high of $190.88 set on Nov. 29. The stock slumped by 11% from this high to its Dec. 26 low of $169.04.

The close of $177.57 on Dec. 31 was my input to my proprietary analytics and resulted in my annual pivot at $117.99, which is now a magnet shown as a horizontal line. The close of $176.72 on Jan. 31 calculated my monthly risky level at $183.17. My weekly value level is $175.63.

The weekly chart for McDonald's

Weekly technical chart showing the share price performance of McDonald's Corporation (MCD)
MetaStock Xenith

The weekly chart for McDonald's is negative, with the stock below its five-week modified moving average of $179.43. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $138.07, last tested during the week of Sept. 11, 2015, when the average was $95.65. The 12 x 3 x3 weekly slow stochastic reading is projected to slip to 55.79 this week, down from 59.89 on Feb. 1. This favors a "sell strength" strategy.

Trading Strategy: Given these charts and analysis, investors should buy McDonald's shares on weakness to my weekly value level at $175.63 and reduce holdings on strength to my monthly risky level at $183.17. My annual pivot of $177.99 remains a magnet.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.