Time to Work: Burgers and Coffee over Wings and Beer

It is a new year so it is time to get into the grind of work again and shed the holiday partying and merriment. Gone are the days of going out with your friends to watch the College Bowl games over wings and beer. It is time to wake up early, grab a cup of coffee and maybe a quick burger for lunch and get down to business. Hmmm, I smell a tasty trade.

Below is the chart for MacDonald’s (Ticker:MCD).

MCD bounced off of the Fibonacci Fan and 200 day Simple Moving Average (SMA) just below the 50% retracement of the July to December up trend to end last week. Yesterday it jumped above the next higher fan line and the 38.2% retracement level. Is it done? The Relative Strength Index (RSI) is just hitting the mid line at 50 and the Moving Average Convergence Divergence (MACD) indicator just turned positive and had a positive cross. It looks like it can run to at least the 100 day SMA if not the area of support from late October through mid December and 50 day SMA near 76.75 – 77.09. Now look at chart for Buffalo Wild Wings (Ticker: BWLD) below.

BWLD had a great run over the summer and into the end of the year but has been selling off since. It is currently consolidating with support of the 200 day SMA and pressure from above from the falling 50 day SMA, which has already bearishly crossed the 100 day SMA. But the MACD is now adding to the downside pressure as it is about to cross lower. and the RSI has turned lower as well just above the mid line. If it breaks through the 200 SMA then the next support is at 43 from early August before 41.00-41.25.

A pairs trade can take advantage of this.

Long 1 lot of MCD and short 1.68 lots of BWLD

Below is a ratio chart of MCD and BWLD.

This chart has actually been moving higher for the past 3 days and looks ready to test the resistance of the falling trend line at 1.74. That is at least a 3.57% move in the pair. Entering into a trade of Long 1 lot of MCD and short 1.68 lots of BWLD, if the ratio moves to 1.74 it will generate between $2.69 and $2.82 per pair traded, and much more if it goes through the resistance.

So pick up an Egg McMuffin and Coffee on the way in and give it that extra boost. trade’m well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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