Is McDonald's Corporation (MCD) Headed for New Highs?

McDonald's Corporation (MCD) recently pulled back to support at its 80-day moving average

Mar 3, 2016 at 3:20 PM
facebook twitter linkedin


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.

MCD Daily 160303

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.

What This Election Year Means for Stocks

Ipad with I voted sticker

  


 
Special Offers from Schaeffer's Trading Partners