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McDonalds Stock Falls to Support After Bearish Comments

McDonalds Stock Falls to Support After Bearish Comments

McDonald's Corporation (MCD) shares fell more than 3% on Tuesday after M Science CEO Michael Marrale noted that the restaurant chain was well below consensus estimates on comparable sales. M Science uses data mining strategies to provide actionable intelligence to corporations and investors. At the same time, restaurant sales are likely to be affected by the recent hurricanes in the southern United States.

Black Box Intelligence had previously estimated that restaurant same-store sales fell 2% and comparable traffic fell 3.9% last month compared with year-ago results. The analyst firm cited Hurricane Harvey and the Floyd Mayweather vs. Conor McGregor fight as two negative factors influencing sales, adding that Hurricane Harvey and Hurricane Irma could be large enough factors to slow growth during the third quarter of this year. (See also: McDonald's Has a Long-Term Growth Problem.)

From a technical standpoint, the stock broke down from the middle of its price channel to critical trendline support near the 50-day moving average at $155.91. The relative strength index (RSI) fell to neutral levels at 45.57, while the moving average convergence divergence (MACD​) may be at the beginning of a bearish crossover. These technical indicators do not provide many hints as to future price direction, but traders should keep an eye on them.

Traders should watch for a breakdown from lower trendline support to S2 support at $149.76 or a rebound from the bottom of its price channel toward R1 resistance levels at $162.54. The iconic restaurant chain is expected to report its next quarterly financial results on Oct. 24, 2017, which means that the expectations for lower same-store sales could take a long time to be proven or disproven from a fundamental standpoint. (For more, see: Why McDonald’s Shares Could Fall 20%.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.