McDonalds Corp - (MCD) - April 19, 2024

SIA Charts’ relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance. On Monday, the United States reported stronger than expected retail sales. This should have been good news for stocks sensitive to consumer spending but that does not seem to be the case, which suggests that investors may be getting concerned about the impact of inflation on consumer spending. In the April 17th edition of the Daily Stock Report, we highlighted deteriorating relative strength in Home Depot (HD). Restaurants also have been struggling in relative strength rankings lately. McDonalds Corp. (MCD), for example, dropped back into the Red Unfavored Zone of the SIA S&P 100 Index Report earlier in April. Currently, the shares are in 63rd place, having dropped 15 positions over the last month, continuing a general downward trend in the rankings that has been happening for nearly all of the last year. Over the last three months, MCD has declined by 7.4%, significantly underperforming the 5.4% gain made by the S&P 100 Index over the same time period.

A long-term uptrend in McDonalds (MCD) shares appear to be topping out. Back in the late fall and winter, the shares bounced back from a previous correction, but their rally to new all-time highs was more feeble that previous breakouts, only exceeding the previous high by about $5.00 before running into resistance near the $300.00 round number. In recent weeks, the shares have been backsliding, with a breakdown below $280.00 signaling the start of a new downswing. Potential downside support tests appear near $260.00 based on a measured move, an uptrend line near $255.00, the $250.00 round number, and another uptrend line near $240.00. Initial resistance on a bounce appears in the $280.00 to $282.50 zone where a recent breakdown point and the 10-week moving average converge.

This 1% chart highlights the significance of the recent downturn in McDonalds (MCD) shares. Since the 2020 market bottom, the shares have generally been trending upward but over the last year, a rounded top has been forming. The first crack in MCD’s armor occurred back in September-October but the shares were able to recover from that selloff. In February, MCD broke out to a new high by one row, then turned downward a bearish Bull Trap top. Since then, the shares have been under distribution, particularly since completing a bearish Double Bottom breakdown earlier this month. The current retreat has extended into a bearish Low Pole, with MCD taking out previous column highs and lows along the way. Currently MCD is testing previous highs above $265.40. A close below that level would confirm the start of a new downtrend with next potential support near $252.50 where an uptrend line and previous lows converge, the $250.00 round number, $247.50 based on a horizontal count and the October low near $242.65. Initial resistance on a bounce appears near $278.93.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 4 out of 10, MCD is exhibiting short-term weakness against the asset classes.