The Big 3: MCD, COF, PG

SPEAKER_1 (0:02)

Welcome back to Trading 360 I'm Marlee Caden. It's time for the big three. We've got three stocks, three charts, and three trades for you. Rick Ducat will be taking us through those charts. Here to take us through the trades today, Jason Brown, stock market expert at thebrownreport.com and author of Five Year Millionaire. Jason, great to have you back on the show. I would love to hear your thoughts here on what we're looking at here in terms of yields. I was just checking in on the 30 year. We're at the highest level since 2004 I think we're the highest since 2007 On the 10 year right now, we're at 512 when I opened the show a few minutes ago.

SPEAKER_2 (0:33)

Yeah, Marlee, good to see you, Rick. Good to see you as well. You know, not that long ago, we were just screaming Dow 5000 And now the Dow has pulled back from there.

With respect to, you know, the yield, it's what I said, similar to last time, when yields are starting to get above 5%, investors are gonna say, if I can get 5% guaranteed, what's the benefit of taking on risk by buying individual stocks or investing in the market? So the stock market has some competition when the risk-free rate is as generous as it is right now. And I think that's what you're seeing in the market play out. We're struggling to go higher. In fact, you know, a lot of these stocks are rolling over and going lower.

SPEAKER_1 (1:14)

All right, so speaking of competition, it's a perfect lead in you've given me to your first pick in the big three. We've got McDonald's struggling against the consumer going to restaurants less. There's a lot of competition in this space. McDonald's have now got their 10 year next strategy, which wasn't received all that well yesterday, but they are moving higher today following that investor day. So how are you looking at McDonald's and this new plan they've laid out going forward?

SPEAKER_2 (1:41)

You know, everybody has to have a plan and that's great, but the numbers tell the real story. When I look at McDonald's and break down the numbers, so the stock fell almost 5% down to 238, which if you look at the chart, which we will in a moment, I mean, this thing has been in a very big sliding decline.

But the numbers, the fundamental numbers is what I want to talk about. So the Q2 picture, US comparable sales increased only 0.8%, which was below expectations. They had about a 2.5% growth the prior year. So the growth you can see is slowing. And then the comments from management was that lower income consumers are cutting restaurant spending on food, as fuel and other necessities take more of their budget, which just makes sense. I mean, you're not going to spend 10, 15 bucks on, we could argue, what may be more unhealthy type food. And then you're also paying more for gas. And then you also have the increase in the interest rates, which means if you're carrying credit card debt, you're going to have less money to spend on consumer discretionary things like McDonald's. You're going to start opting for cooking. Maybe you bake up in a bag of rice and boil some rice. But bottom line is, they're seeing it in their numbers. And then technically, I know we're going to get into the chart. We had a moving average cross in the trend back in April, and the stock has been in the downslot since then. I thought we would see a bounce around 245 We broke and took out that level. So McDonald's is struggling technically and is struggling fundamentally.

SPEAKER_1 (3:14)

With a bag of rice and ramen, you're bringing me back to college here at Jason. And I'm a big fan of McDonald's. I love the Golden Arches. But Rick, as Jason was highlighting, I mean, you can see he was highlighting April. And the trend has not been McDonald's friend since then. So what are you seeing in the technicals?

SPEAKER_3 (3:32)

Yeah, I'm not sure I see the McRice catching on. But to look at what we have here so far, it was a falling wedge type shape before we had our more steep decline here. So this was a downside breakout from a pattern that was already tilted downward here. Now we have formed a very narrow, very tight channel here between our two white lines. You take our top line, extrapolate it, duplicate it, put it across the lows. It matched up pretty cleanly for most of our recent activity. Same for yesterday. Now we've had a downside breakout that hit lows of 234.03. We have a attempt so far today to push back into our channel here. But for now, the candle that's taking shape is a Harami-type candle, our small green candle completely encompassed within the previous day's larger red candle. If we do hold in this framework here heading into the close, a Harami is suggestive of a stall in momentum and potential turnaround. So that could be an interesting thing to consider going forward. Other notable highs include 252 here, an old high before our sharp decline, a repeated floor here near 261, a repeated ceiling near 279 So we had that sideways movement there that did transition into our rapid descent here. So RSI, our measure of momentum, trending lower here. We can see that after a foray into the oversold area that took us below 30 yesterday, we have just barely managed to claw our way out here. We are at 30.3 right now. So the oversold area typically suggestive of further weakness to come is how it's interpreted here. So be on the lookout to see if we make that crossover again. Five-day EMA in dark blue, exponential moving average, 244 is where that one comes in. If we were to recover and break out to the upside, our 21-day EMA representing one month comes in at 253.22.