Slight Correction Lower On MCD before Another Move Higher?

Yesterday, the fast-food giant McDonald’s Corp (NYSE: MCD) managed to beat its initial earnings forecasts. Nevertheless, investors fear that governments could impose new movement restrictions, which may affect the business in the near term. McDonald’s Corp is already experiencing delays in shipping times of equipment to new restaurants. The delays are mainly caused by covid-related issues and the global semiconductor chip shortage, which might continue for a while more.

The technical picture shows that the stock, after hitting an all-time high on Tuesday, had corrected slightly lower, post-earning’s report. But looking at our 4-hour chart, we can see that the stock is still balancing above a short-term range, where the stock had been trading in the period between the beginning of May and mid-July, prior to breaking above the upper side at the end of last week. Even if MCD corrects a bit lower, but the upper bound of that range remains intact, we will stay positive with the near-term outlook.

A small push lower could bring the stock closer to the upper side of the aforementioned range, at 238.18, and if a hold-up occurs there, new buyers may take advantage of the lower price and travel higher. If so, MCD could drift back to the 243.85 obstacle, or to the 247.02 level, marked by the current all-time high. If the buying doesn’t stop there, the stock may overcome that level, this way placing itself into uncharted territory. We might then target the psychological 250 zone.

The RSI is currently flat but remains above 50. The MACD, despite pointing lower and sitting below the trigger line, continues to run well above zero. The two oscillators still indicate positive price momentum, which may come in line with the idea discussed above.

Alternatively, if the stock ends up falling back below the upper side of the previously mentioned range, some buyers might step away from the playing field for a while, especially if the share price drops below the 235.24 hurdle, marked near the lows of July 21^st and 22^nd. MCD may drift to the 230.22 obstacle, a break of which might set the stage for a test of the lower side of the aforementioned range, at 227.59.

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