Back in early 2012, McDonald’s was one of the best performing mega cap stocks in the U.S. market, a clear bull market leader. Since then though, it has stalled in quite disappointing fashion given the broader market’s continued strength:
After a failed breakout to a new high earlier this year, MCD has now fallen down to the very pivotal $95 level in the past week. Zooming in to the 2 year chart, we can see just how important that level has been:
I’ve drawn the red line right at $95. It has acted as resistance, then support, then resistance, and once again support in that period. The stock’s tepid bounce in the past 2 days is a cause for concern, however, since the prior instances were sharp V-bottoms earlier this year. Of course, I’ve also been fundamentally bearish on MCD given its declining margins, increasing competition, and franchisee unrest over the past year, not to mention its high valuation relative to its fast food peers.
Investors haven’t been lovin’ Mcdonald’s for some time now. But more urgent selling will likely take place on a convincing break of $95. For now, it remains very important support.