McDonald's Corporation (MCD) recently pulled back to support at its 80-day moving average
Fast food giant McDonald's Corporation (NYSE:MCD) hit a record high of $124.83 on Feb. 1, just a week after reporting blowout earnings, but has since pulled back to its 80-day moving average -- a level that has served as a short-term launching pad in the past. Against this backdrop, and considering the sentiment surrounding McDonald's, is now the time to bet on a rally?
Over the past three years, MCD has experienced a pullback to its 80-day moving average five times, according to Schaeffer's Senior Quantitative Analyst Rocky White. After this signal, the stock has enjoyed a positive five-day return four times, with an average five-day return of 1.1%. And 21 days after the signal, MCD has been positive a whopping 75% of the time. This bodes well for the shares going forward.
Despite MCD's impressive performance on the charts, more than half of the analysts following the stock rate it a "hold" or worse, leaving plenty of room for future upgrades. Plus, although short interest represents only about 4% of MCD's total available float, these bearish bets have ramped up by 237% during the two most recent reporting periods. A short squeeze could also add fuel to MCD's fire.
Looking to the options pits, MCD has a 50-day put/call volume ratio of 0.94 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- a ratio higher than 77% of all readings in the past year. In other words, option buyers have picked up puts over calls at a faster-than-usual clip during the past 10 weeks.
However, now is a prime time to pick up MCD's short-term options. The stock's Schaeffer's Volatility Index (SVI) of 17% is in just 18th percentile of its annual range, MCD's near-term options are fetching historically low premiums. McDonald's Corporation (NYSE:MCD) was last seen down 1.3% at $116.95.