MCD faces technical and fundamental weakness from slowing sales and low-income consumer pullback; speaker holds a bearish view on the stock.

We have McDonald's, which is suffering from a decline in consumer demand for restaurants. There is a lot of competition in this field. They now have their strategy for the next ten years, which did not receive a good reception yesterday, but they are rising today in the wake of Investor Day.

When I look at McDonald's and analyze the numbers, I find that the stock has dropped by 5% to 238, and if you look at the chart, which we will do shortly, you will find that the stock is in a state of sharp and continuous decline .

But the numbers, the essential numbers, are what I want to talk about.

For the second quarter , comparable sales in the United States rose by only 0.8%, which was below expectations. They achieved growth of approximately 2.5% in the previous year. So, as you can see, growth is slowing down.

The administration's comments also pointed out that low-income earners are cutting back on restaurant food, with fuel and other necessities further draining their budgets, which makes sense .

I mean, you're not going to spend $10 or $15 on what we might consider unhealthy food, while also paying more for fuel, not to mention higher interest rates, which means that if you're carrying credit card debt, you'll have less money to spend on optional consumer goods like McDonald's.

You will start choosing to cook at home, perhaps you will open a bag of rice and boil it . But the bottom line is that they are seeing it reflected in their numbers.

From a technical standpoint, and I know we will be discussing the chart, we have seen a moving average crossover in the direction since April, and the stock has been declining since then.

I thought we would see a rebound at around the 245 level . But we broke that level and surpassed it . So, McDonald's is struggling technically and is also struggling fundamentally.

the trend hasn't been in McDonald's favor since then Yes, I'm not sure the "Mc-Rice" idea will be popular, but look at what we have here so far, there was a descending wedge shape before we saw our steepest decline here.

So, this was a downward breakout from a pattern that was already trending downwards. Now, we have formed a very narrow and limited channel here between our two white lines. If we take our top line and extrapolate, repeat, and match the line with the bottoms, it fits accurately with most of our recent activities.

Except for yesterday, we have now seen a downward breakout that reached its lowest point at 234.03. We have an attempt so far today to get back inside our channel here. But at the moment, the candle that is forming is of the " Harami" type.

Our small green candle is completely enclosed inside the larger red candle from the previous day. If we maintain this framework until the close, the "Harami" pattern indicates a pause in momentum and a possible reversal.

Therefore, this may be something interesting to consider in the future.

Other notable highs include 252 here, a previous high before our sharp decline, a recurring floor near 261, and a recurring ceiling near 279. So, we saw that sideways movement which then turned into our rapid decline here.

So, the Relative Strength Index (RSI), our momentum measure, is trending downwards here . We can see that after penetrating the oversold zone that pushed us below 30 yesterday, we have barely managed to get out of it now.

We are currently at the 30.3 level . Therefore, the oversold zone usually indicates further weakness to come, that's how it's interpreted here. So, keep an eye out to see if we make this intersection again.

The 5-day exponential moving average, shown in dark blue, comes at the 244 level. If we recover and break the upward barrier, our 21-day exponential moving average, which represents one month, comes at 253.22.

Finally, our volume analysis shows that we have an accumulation of volume here, between 247 and 256. It is a somewhat more volatile area here, but there is also another, larger and more pronounced area between 268 and 278.

Also note the heavy volume during these down days as well . It's not a really good sign when you put all this data together.

Yes, despite that , McDonald's shares rose today by one percent to reach 240.82. Yes, as you said, Marley, I also enjoy McDonald's French fries, but I'm not really keen on investing in the stock, at least I'm not optimistic.

Therefore, I view this as a " bear call spread" strategy. I am looking at the expiry date in November 2026 . If you buy an option with an execution price of 270, that means a discount of about $3, and if you sell an option with an execution price of 260, you will get a credit of about $1.50.

In fact, if you reversed those two transactions, it would cost $1.50 to cover yourself, and then you would get a credit of $3. So, you will get a net balance of $1.50. What I like about this difference is, firstly, that you have an upside margin of 20 to 25 points that the stock can move into before you encounter any kind of problems, and I don't see it reversing and going up 20 points, but again, you have that margin.

Secondly, over time , that bonus stays in your pocket. So, you risk about $10 to earn $1.50, which mathematically represents 15%. A 15% return over 57 days, assuming the stock remains below 260, is not a bad risk-to- reward ratio.

They had their renewal plans, as I said, and the market showed you its opinion on that through large sell-offs . So, it's not like technology stocks where they're going to introduce a new AI model or something to reverse the stock's trajectory tomorrow.

I believe the stock will continue to decline or, at best, move sideways, which makes me feel comfortable adopting a " sell the down call" strategy .

But what I like about Procter & Gamble is that, unlike McDonald's and Capital One, it does not rely on disposable income for entertainment spending. The thing about Procter & Gamble is that people still actually need Tide, Pampers, Charmin toilet paper, toothpaste, and all that stuff, right?

Therefore, it is the last thing you might think of giving up, whereas McDonald's might be the first thing you decide to stop spending your money on.