Dow component Mcdonald’s Corporation (MCD) report second-quarter 2020 earnings Tuesday’s pre-market session, with analysts looking for earnings per share (EPS) of $0.76 on revenues of $3.73 billion. The stock fell nearly 10% in the two weeks after the fast-food giant missed first quarter earnings estimates and decreased by 6.2% year-to-year sales decline in April, and it remains stuck in a persistence of the trading range on the three-quarters of the distance back from February’s all-time high.
- Mcdonald’s buying interest has increased in July, after a tough second quarter.
- Wall Street is very optimistic about the long-term prospects, in spite of the pandemic of contrary winds.
- A break is probably not up to what the investors can judge the impact of a second wave in COVID-19 infections.
The slow pace of the reopening of the pace has weighed on Mcdonald’s shares in the second quarter, but buying interest has increased in recent weeks, the lifting of the accumulation of readings to five-month high. This looks like a speculation offering, investors betting that fewer infections in other parts of the world will be to the revenue base. Even so, Mcdonald’s owns most of the property sitting under the franchises, the addition of a secondary wind from the front because of the low property prices in many parts of the country.
Wall Street consensus currently rates the stock at “Strong buy,” supported by 20 “Buy” and 4 “Hold” recommendations. No analysts are recommending that shareholders sell their positions at this time. Price targets range from a low of $178 to Street-high$ 230, while the stock is trading about $10 below the median $209 target. This position raises the chances for a buy-the-news reaction if the company meets the modest earnings expectations.
Speculationor speculative trading, refers to the act of conducting a financial transaction that has a risk of losing the value, but also holds the hope of a significant gain or other large value. With speculation, the risk of loss is more than compensated by the possibility of a substantial gain or other reward.
Mcdonald’s Long-Term Chart (2007 – 2020)
The stock broke out above the December 1999 high of $49.56 in 2007 and settled into a volatile trading range on the top of the support during the economic collapse of 2008. This resistance causes a secondary breakout 2010 that has lifted the stock in Dow and the leadership on the market. The rally ended just above $100 in 2012, paving the way for a broad side pattern rebuffed several attempts to escape in 2015.
The all-day breakfast initiative has triggered a bullish trend supported at the time, the sculpture of a well-defined Elliott five-wave rally pattern that stopped at an all-time high above $220 in August 2019. The stock pulled back in the $180s in November and posted a lower high in February, in front of the vertical decline that found support just above the .786 Fibonacci rally retracement level in March. The monthly stochastic oscillator has entered in a purchase cycle in January, with that bullish influences still in effect as we head into the dog days of August.
Elliott Wave theory was developed by Ralph Nelson Elliott to describe the movements of prices on financial markets, in which it was observed and identified recurring, fractal wave patterns. The waves can be identified in stock price movements and in consumer behavior. Investors try to take advantage of a market trend could be described as “riding a wave.”
Mcdonald’s Short-Term Chart (2018 – 2020)
The balance volume (OBV), the accumulation-distribution indicator topped in October 2019 and has flared up in February 2020, the display of an all-time high. OBV failure of the escape head in March, the fall in support for the date of February 2019 low. The rebound in the second quarter of the impasse, in April, about half the distance back to the top, while a June breakout attempt has failed. Bulls had more luck at the beginning of this month, the lifting of the indicator is the highest since the month of March.
The .786 retracement level of Fibonacci is in line with the psychological$ 200, where the stock is trading at Monday morning. One of the positive results of the reaction should clear the barrier and prepare the ground for a test during the first quarter of high. The trend line of lower highs establishes a zone of resistance between $216 and $222 which may not give away until the investors can judge the impact of the second wave of the pandemic.
The Bottom Line
Mcdonald’s stock could gain ground after this week’s earnings report, but a breakout to new highs is unlikely until we get through the fall and winter of 2020 and 2021.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.