McDonald’s Stock (MCD): Buy the Dip or Chase the Rally?

Post-Earnings Setup for MCD

McDonald’s (NYSE: MCD) reported earnings on February 10th before the market opened, and the options market had priced in a 3.7% expected move. However, the actual reaction was stronger, with the stock jumping approximately 4.8%. So far, MCD is holding onto its gains, signaling strength and making it an attractive buy candidate.

The Big Question: At What Price to Buy MCD Stock?

While MCD’s earnings reaction is bullish, traders always have to balance between waiting for a pullback for a better entry price and risking missing the opportunity altogether. Using volume profile analysis, we can identify key levels where buyers may step in.

Buy Levels: Targeting a Pullback With MCD Stock

Instead of chasing the breakout, we want to layer our buy orders at strong support zones identified through volume and price action.

1st Buy: $300.82

• Why? This level is just above $300, a key psychological round number, where liquidity is often concentrated.
• Additional Context: It's also slightly above the Value Area High (VAH) from December 15, which acted as resistance for nearly a month before being broken today.
• Objective: This ensures an entry ahead of those waiting at the round $300 level.

2nd Buy: $298.75

• Why? Volume profile analysis shows buying interest around this level.
• Additional Context: This is slightly below the $300 psychological level, meaning it could trap weak hands who panic-sell on a minor dip.

3rd Buy: $296.85

• Why? This level corresponds to historical VAH levels from early December.
• Additional Context: It aligns with the lower boundary of the pre-earnings bull flag, making it an ideal deeper dip-buy level.
• Expectation: A strong flush down to this area is less likely, but having an order here ensures a better average cost.

Average Entry Price Calculation

If all three buy orders are filled, the average entry price will be $298.81.

Stop-Loss Placement for this MCD Dip Buying *which may not come

A stop needs to be placed below the consolidation zone before the earnings breakout. We are setting it at $291.88, just below the Value Area Low (VAL) from February 7th.

Profit Targets: Taking Partial Profits

Since this is a post-earnings momentum trade, we are locking in partial gains along the way before holding for potential all-time highs.

1st Target: $304.72

• Why? This is just under today’s first lower VWAP standard deviation, an area where price might stall temporarily.
• Objective: Risk mitigation, securing a portion of the trade early.

2nd Target: $307.13

• Why? This is just below today’s VAH, a potential short-term resistance level.
• Objective: Further de-risking while letting the remainder of the trade run.

3rd Target: $315.25

• Why? Just below MCD’s all-time high of $316, which will likely act as a major resistance level.
• Objective: Capture most of the remaining upside if the rally continues.

A long term runner for the years ahead is possible to consider as well, for example on 25% of the position. Preferably with some trailing stop, even a wide one. In any case, some sort of a stop at your discretion, is better than no stop at all, IMO.

MCD Stock Trade Execution & Risk Management

• Equal Position Sizing: Instead of increasing position size at lower levels (e.g., 1x, 2x, 3x), we will allocate equal amounts across all three buy levels.
• Trailing Stop Strategy: Once the second profit target is hit, move the stop-loss to lock in gains at the first profit target ($304.72).

Final Thoughts: The MCD Post-Earnings Play

McDonald's has reacted strongly to earnings, and while there’s always a risk of a full reversal, the current price action suggests bullish momentum is likely to sustain. By strategically layering our buy orders and setting realistic targets, we position ourselves for a high-probability trade while managing risk effectively.

📌 Use this plan as a guide and adjust based on live market conditions. Trade at your own risk. Visit ForexLive.com for additional views.