McDonald's Corporation (MCD) is the fast food component of the Dow Jones Industrial Average. The stock closed Friday at $178.36, up 3.1% year to date, which lags the 7.7% year-to-date gain for the Dow 30. Like the Dow, McDonald's stock closed Friday at an all-time high of $178.40, in bull market territory at 48% above its 52-week low of $120.52 set on Feb. 24, 2017.
McDonald's reports quarterly results before the opening bell on Tuesday, Jan. 30, and analysts expect the maker of the Big Mac to post earnings per share of $1.59. Same-store sales are expected to beat expectations on sales from the '$1, $2, $3 Dollar Menu'.
Where I live in Florida, a new McDonald's store opened in September 2016. I was one of the first 100 customers, which awarded me a free Big Mac once a week for a year. The Big Mac was created about 50 years ago, and its creator is said to have eaten at least one Big Mac per week. He died in November 2016 at age 98, so the 540-calorie sandwich deserves its status as one to the most popular fast food item in the world today. Aside from offering low-priced options, McDonald's has slowly raised prices on many of its popular items. (See also: Who Are McDonald's Main Competitors?)
The daily chart for McDonald's
McDonald's has been above a "golden cross" since Jan. 23, 2017, when the stock closed at $121.38. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. The horizontal lines from bottom to top are my semiannual value level of $157.88, my quarterly value level of $163.36 and my annual value level of $168.70. My monthly risky level is above the chart at $184.28. (For more, see: McDonald's Stock Looks Vulnerable After Record Run.)
The weekly chart for McDonald's
The weekly chart for McDonald's is positive but overbought, with the stock above its five-week modified moving average of $174.42. The stock is well above its 200-week simple moving average at $119.39, which is also the "reversion to the mean," last tested during the week of Sept. 11, 2015, when the average was $95.65. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 88.06, well above the overbought threshold of 80.00 and approaching the 90.00 threshold, which would bring the stock into an "inflating parabolic bubble" formation.
Given these charts and analysis, my strategy is to buy McDonald's shares on weakness to my annual, quarterly and semiannual value levels of $168.70, $163.37 and $157.88, respectively, and to reduce holdings on strength to my monthly risky level of $184.28. (For additional reading, check out: McDonald's vs. Burger King: Comparing Business Models.)