2 Big Name Consumer Stocks Making All-Time Highs

Posted by on October 16, 2015 9:47 AM

Despite a market where the S&P 500 Index (SPX) (SPY) is basically unchanged year to date, two well known consumer stocks hit new all-time highs yesterday.  Those are Nike (NKE) and McDonald's (MCD).

One thing to note, without delving too much into the fundamentals, is that these two companies have been mentioned among those who faced increase competition and trends shifting in the era of Millennials.  For NKE, by the likes of Under Armour (UA) for example -- for MCD, from health concerns, shifting tastes, and companies like Chipotle (CMG) and others.  Yet the stocks are hitting new all-time highs, which is the most important thing to us, as 'the chart tells the tale', to paraphrase Jesse Livermore.

If you look at the long-term charts of these names below, you can see NKE has been more on a steady upward trajectory since 2009 that has accelerated since 2012. 

Meanwhile, MCD has been in a trading range since 2011 -- is it poised to break out of that range with further upside?  We'll look at that below.

NKE & MCD Long-Term Monthly Chart
nke mcd m

The MCD big picture chart poses an interesting setup.  Note that is a long-term view, and we may trade MCD (or NKE) in both directions, including bearishly, in our BigTrends shorter-term option trade recommendation newsletter services.

As you can see on the Weekly Chart below, MCD has been in a range since 2011 -- this range has been a somewhat mild narrowing triangle with higher lows (a bullish setup in general).  Weekly Percent R on MCD has been strong this year, with pullbacks on that indicator being contained by mid-levels.

Generally, the longer-lasting a range is, the more significant a breakout of it is and the potential move that can occur.  In that case, the MCD breakout (if it sticks, it still could pull back into the range) could have some strong upside legs.  The previous range on MCD was around 20 points -- it's certainly reasonable to expect 20 points of upside breakout in the stock over the long-term, but this could take a couple years to develop.

MCD Weekly Chart
mcd w 101615

Whether the news impetus is all-day breakfast, its real estate and financial structure, free cash flow, or other factors -- we're most concerned about the price performance dictated on the charts.  And what looks like a multi-year breakout of a consolidating trading range in MCD should present a longer-term opportunity for further upside.

As far as ETF exposure, data from etfdb.com indicates that SPDR Consumer Discretionary ETF (XLY) is a way to gain exposure to both of these names.  NKE weighting of 3.8% and MCD weighting of 4.2% in XLY in the most recent data .  NKE is also 5% weighted in the mighty Dow Jones Industrial Average ETF (DIA) (INDU).

 

by Moby Waller
co-Portfolio Manager, ETFTRADR & Rapid Options Income
BigTrends.com
1-800-244-8736

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