It has been a while since April 3rd, when we published our last update on McDonald’s. In that highly bullish article we shared our view that MCD stock ‘s recovery was poised to continue and eventually reach $180 a share. MCD was trading near $157.70 back then. Over five months later, it is still hovering around $157.70, so obviously no material progress has been achieved by the bulls.
MCD stock did rise to $171.56 in June, but we admit it was not the strong, confident growth we have been expecting. On the other hand, the price never fell to a new annual low either and has been locked in a range instead. Just like no trend lasts forever, no range holds forever, as well. The only question is in what direction is the exit? Taking a fresh look at the price chart of MCD stock below may help us find the answer.
The hourly chart reveals MCD’s search for a direction has formed a perfect contracting triangle correction, labeled a-b-c-d-e, where each wave is smaller than the previous one. According to the Elliott Wave Principle, McDonald’s is now supposed to go in the direction of the trend preceding the triangle.
Since MCD was clearly in an uptrend prior to entering this sideways retracement, it makes sense to expect more strength in this name as long as it trades above the bottom of wave “c” at $153.15.
MCD Stock: The Big Picture
But triangles do not form in a vacuum. They are known to precede the final wave of the larger sequence. In order to confirm that a triangle is really in place, we have to see if it fits correctly into the bigger picture on the daily chart of McDonald’s.
The triangle in question fits nicely in the position of wave 4 within a five-wave impulse to the upside. Wave 1 traveled from $87.50 to $131.96 and was followed by wave 2 down to $110.33. Wave 3 was a wonder to behold. It lifted MCD stock to an all-time high of $178.70 in late-January 2018. Wave 4 has already slightly breached the lower line of the trend channel, which is quite normal for fourth waves – triangles or not.
If this count is correct, wave 5 to the north is the last missing piece of the puzzle. It has the potential to take MCD stock to a new all-time high near $190 a share before the bears return for a notable A-B-C pullback.
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