McDonalds, Starbucks Rally to All-Time Highs
Traders and investors are never more enthusiastic about higher prices than when stocks are trading at new highs – and the longer-term the highs the better.
But the light selling accompanying the new all-time highs in stocks like ^MCD^ and ^SBUX^ is a recognition that, for many traders – including most professionals – new highs are an opportunity to buy rather than to sell.
Whether this is borne out this time, in the wake of these new, long-term highs remains to be seen. Shares of MCD pulled back by half a percent ahead of trading on Wednesday, while shares of SBUX dropped by well over three quarters of a percent. So the profit-taking, such as it is, remains light for now. But traders should keep an eye on these stocks should a day of selling turn into two or three sessions, and currently neutral conditions in these stocks give way to the oversold.
In bull market territory all year, shares of McDonald’s last traded in oversold territory in late September and are up 14% since then. Starbucks was trading at oversold levels as recently as mid-November. Then, a four-day pullback ending in a pair of finishes in oversold territory paved the way for a rally in SBUX that took the stock higher by more than 4% six days later.
Down less than 1% on Tuesday, neither MCD nor SBUX have positive edges of more than half a percent. This means that both will require significant additional selling before they are trading at levels where buyers historically have been sufficiently tempted to begin bidding aggressively for shares. Of the two, Starbucks is closer to those levels, but both stocks are technically in neutral territory ahead of Wednesday’s open.
Traders looking for other blue chip stocks trading in bull market territory that may be in more mature pullbacks may want to consider ^NKE^ and ^HD^. Both NKE and HD have finished down two in a row and also were recently trading at major new, long-term highs.
The stocks in today’s report were drawn from the data and research available through The Machine. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com