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Is Fast Food Gaining Traction? The Technical Say Yes!

David Becker
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Is Fast Food Gaining Traction? The Technical Say Yes!

The margins for lower end fast food seemed to have been fading recently has chains like Starbucks (NASDAQ:SBUX) and Dunkin Donuts (NASDAQ:DNKN) make their way into casual fast food dining. McDonalds (NYSE:MCD) has recently seen a declining in same store sales, but strong momentum and an upward trend make the stock price look attractive.

The technical on MCD are solid and the trend is higher as reflected by the “gold crossover”. This bullish trend indicator occurs when the 50-day moving average crosses above the 200-day moving average. Generally when this crossover occurs a long term uptrend is in place and can continue to perpetuate for long term upward returns.

Additional strong momentum is gaining traction on MCD. The MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The bullish crossover signal was accompanied by the MACD index moving from negative to positive territory which confirms the buy signal. The last time the MACD crossover occurred in mid-February the stock price of MACD climbed 4%.

The next level of target resistance on MCD is seen near $99 while support on the fast food chain is seen near the 50 and 200 day moving average at $95.

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