Bulls Should Target This Dow Stock Right Now

MCD has been positive every November in the last 10 years

Oct 29, 2018 at 3:26 PM
facebook twitter linkedin


The U.S. equities market is set to end October at a substantial loss, with the Dow down 7.7% month-to-date, and the S&P 500 off 9.2%, at last check. History suggests a turnaround could be coming, considering November marks the start of the most bullish six-month period for stocks. Among specific names bulls may want to watch next month is McDonald's Corp (NYSE:MCD), which is the only Dow component on our list of the best stocks to own on the S&P 500 Index (SPX) next month.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, MCD has averaged a November gain of 2.8% over the past 10 years, with each return positive. At last check, MCD stock was up 0.5% at $174.23, extending last week's impressive gain. Specifically, the shares tacked on 3.5% as a positive earnings reaction offset stiff broad-market headwinds, and came within striking distance of their Jan. 29 record high of $178.70. What's more, a late-week pullback indicated previous resistance in the $170-$171 region could now be working as support.

mcdonalds stock daily price chart on oct 29

In the options pits, a number of speculators last week bet on the stock to stall out near current levels -- or more likely targeted elevated pre-earnings implied volatility (IV). MCD's November 177.50 call is home to peak open interest of 8,512 contracts, and data suggests a number of positions were sold to open last Monday, Oct. 22, when the stock's at-the-money (ATM) IV term structure for front-month options was docked at 22.11%. Today, Trade-Alert pegs the ATM IV term structure for November options at 21.16%.

Elsewhere on Wall Street, sentiment is relatively upbeat toward the Dow stock. While 14 of 21 analysts maintain a "buy" or better rating, the average 12-month price target of $191.15 is a nearly 10% premium to current trading levels. Plus, the 7.44 million MCD shares sold short represents just 1% of the equity's float.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report
 


 


 
Special Offers from Schaeffer's Trading Partners