MCD may explode, here’s the setup
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.
McDonalds
(
MCD |
Quote |
Chart |
News |
PowerRating) is setting up for an
explosive breakout to the upside, and I want to make sure you get in on it when
it happens.
I know what you’re thinking. McDonald’s? The
burger joint? Come on Andy–give me something with bytes or bits or clicks like
(
AAPL |
Quote |
Chart |
News |
PowerRating) or
(
GOOG |
Quote |
Chart |
News |
PowerRating).
Well, the beauty of technical analysis is that
you don’t have to care anything about what the company actually does. The only
thing that matters is what the stock does, and I like what I see on MCD.
The first thing you’ll notice on the chart above
is the 3 month consolidation pattern that MCD has made between 32 and 34.
Typically these types of tight trading ranges are the base for a large, extended
move in one direction or another. Just look for a break of the consolidation
range on above average volume and play the stock in that direction with a 4%
trailing stop.
Look for a break (and hold) above 34.25 on volume
of more than 9 million shares as your indicator to initiate a bullish position.
The key here is patience. Getting in now at 33.95
or 34 may be tempting because you will already have an extra .25 profit by the
time the stock begins its breakout move. Unfortunately, this type of thinking
gets a lot of traders in trouble because they are ignoring the power of the
34.00 resistance level that has made this consolidation pattern so appealing in
the first place. By simply waiting for a move above 34.25 on good volume, you
put the risk/reward ratio in your favor by a huge margin—where if you get in
now you actually have a greater chance of the 34.00 resistance level holding and
losing on the trade than winning. If the stock never breaks 34.25 on big volume,
we’ll just keep on looking for other opportunities in a very tradable market!
Andy Swan