Shares of McDonald's Corp (MCD) are in free fall. The stock has declined from $210 to its current $192.25 after earnings results missed the lofty expectations of Wall Street just over a week ago. The stock topped out in August $221.93 and is now down 13.5% from its 52 week highs. The price-to-earnings ratio had swelled close to 30 at the 52 week highs. For a fast food stock this was unprecedented. Often investors see tech stocks trading at a 30 or higher P/E ratio.
Money had found a home its home in McDonald's as rates fell and the dividend paid by the fast food company became extremely attractive. As interest rates had surged toward 2% on the 10 year bond, money is naturally rotating away from this 'safe haven' stock.
As a swing traders, this gives us a unique opportunity to play McDonald's Corp. at both a technical support level, an oversold level as well as bank on a pull back in rates from this big pop. The technical level that shows itself on the stock chart is at $190.00. This is a major pivot point from early 2019 is also a Fibonacci 50% retrace of a move that started in 2018 and took us to the 2019 highs of $221.93. As a Chief Market Strategist, I look for levels that have multiple factors signaling buy (or short). In this case, the $190.00 level is a no-brainer for a bounce back to $200.00 with a month or so. This is a classic swing trade setup. Note the chart below. I have used this setup countless times in the past and it has a success rate of nearly 90%. I will look to buy McDonald's Corp at $190.00.
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