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JC Parets’ Eagle Bay Capital analyzes 30 Dow companies every week. In last week’s report, he dug into two McDonald's Corporation (NYSE: MCD) charts.

Structurally, the firm has been neutral and waiting (even hoping) for “some consolidation around the 200 week moving average which also represents the lows from February.”

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In addition, “with momentum putting in a bearish divergence at this year's highs, overhead supply from broken trendline resistance and relative strength still in a strong downtrend,” they consider that a more neutral stance is still best.

Parets sees no reason to act, structurally.

He prefers, instead, a more tactical look: “This thing is all over the place and I see zero reason to be involved structurally. The recent developments, however, are positive and a 4th test of this overhead supply from since 2011 would argue for an ultimate breakout to new all-time highs that we want to be buyers of.”

Until then, he'll wait patiently and focus on the daily chart for a more tactical approach.

Short-term, the stock hit Eagle Bay’s upside target in November near $97, “where we have former support/resistance, downtrend line from Spring highs and flat/declining 200 day moving average - and then rolled over nicely."

Then, in early-December, the stock briefly broke below October support, but then rallied back.

Parets’ recommendation: “Momentum is giving us mixed signals here and I we've preferred to stay away from this name, particularly with a downward sloping 200 day. We said that a bullish development would be a breakout above 97.50 and we got that last month. I would be a buyer of weakness but only above the December highs. The next target is last years highs just under 104, but I would much rather be in this name once the 200 day turns up.”

He concludes: “It is hard for a sustained rally with this much downside pressure driven by that declining 200 day. We only want to be in this above the December highs and above a rising 200 day. We currently don't have either.”

Posted-In: Dow Thirty Eagle Bay Eagle Bay Capital Eagle Bay Solutions JC ParetsAnalyst Color Technicals Trading Ideas


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