Is McDonald’s a purchase or a sale in November?

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The technical picture suggests that the price could rise above $230 again
The current risk/return ratio is not good for long-term investors
McDonald’s hired Reginald Miller as the company’s new Chief Diversity Officer

Elections in the U.S. are being closely watched, with Biden taking the lead in Georgia, Pennsylvania, Nevada and Arizona according to the latest news, but the U.S. presidential election continued to progress, with the winner not yet officially announced. McDonald’s shares have risen from $168 to $230 in less than six months, and the current price is around $216.

Fundamental analysis: risk-return ratio is not good for long-term investors

McDonald’s Corporation (NYSE: MCD) is an American fast food company founded in 1940 and is today the world’s largest restaurant chain in terms of sales. McDonald’s is the second largest private employer in the world with more than 1.7 million employees (behind Walmart).

McDonald’s shares have been on an upward trend in recent months, and so far there is no sign of a turnaround. McDonald’s is a stable company with a good position in the market, but the current risk/reward ratio is not good for long-term investors.

McDonald’s reported that global corporate revenues in the third quarter were down 2.2% year on year. Sales results were impacted by negative comparable sales in Latin America and China along with the COVID 19 pandemic.

Nevertheless, the company increased its quarterly dividend by 3% to $1.29 per share. McDonald’s has distributed more than $9 billion to its shareholders in the last three years, and this figure may be even higher in the future.

For the first time in more than eight years, the company has added baked goods to its menu. The new menu items apple strudel, blueberry muffin and cinnamon rolls will be available from 28 October at participating locations in the USA.

The company may also offer the McRib sandwich nationally again for the first time since 2012. It is also important to note that McDonald’s has hired Reginald Miller as the company’s new Chief Diversity Officer.

There are some obvious risks involved in trading McDonald’s stock (NYSE: MCD), but as long as McDonald’s share price remains above $200, the stock remains in the bull market.

Technical analysis: The trend line represents a very strong support level
Data source: tradingview.com

If we take a look at the chart above (period of one year), we can see that the price of this stock has risen from $124 to $230. As long as the price is above this trend line, this stock is in the “buy” zone and there is no sign of a trend reversal.

If the price falls to the trend line and we get a “bullish” confirmation candle, this would be a very good entry point for short-term traders trading “stop loss” and “take profit” orders. The trend line represents a very strong support level, if the price breaks through this trend line, it would be a very strong “sell” signal and we have an open path to $200.

If the price jumps above $220, it would be a signal to buy McDonald’s shares and we have an open path to $230. A rise above $240 supports the continuation of the uptrend, and the next price target could be around $250.

Summary

Investor attention is currently focused on the U.S. presidential election, and the U.S. stock market is supported despite the ongoing election uncertainty. Joe Biden has a good chance of becoming the 46th president, and the Bidens camp hopes to cross the 270 threshold very soon. When trading McDonald’s shares, investors should keep in mind that this is a stable company with a good position in the market. The technical picture suggests that the price could rise above $230 (all-time high) again, but in my opinion this stock is a little overvalued.

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