Forecasting MCD H&S breakdown (Technical Analysis)

March 5, 2016

Hi folks,


Today I am really bored, so I decided to add a technical example just to spice it up. Please note that our true direction is doing predictive quantitative models. We are especially proud of our silver bottom predictive models that took months of proprietary work - which we believe is world-class. However, I did spend a couple years being the key technical and sentiment market-timer in a major local brokerage and I came across an interesting chart pattern. So, I am posting this because I am feeling whimsy and wanted to reminisce about old times.


Q) Why did the chicken cross the road?

A) To prove he wasn't a nugget.


Chicken... nugget... McDonalds ... get it? :)


Main observations:

1) Insider selling

2) Weekly MACD negative cross

3) Recent selldown into consolidation



1) Short if price closes below 115.

2) Cut-loss if price closes above 119.

3) Price targets are 112 and 103.


I love their curry sauce.




Post trade analysis (March 29, 2016):

The price cycled with the broad market and is currently back challenging it's high at 123. Based on the above strategy, the trade didn't happen, as price didn't close below 115. Even if a short position was taken, we would have been stopped nicely at 119.


But here also is a lesson on the short term uncertainty nature of technical breakout trades. It serves to highlight the need for a more statistical methodology for making trades, hence why we do what we do.


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