Let me be honest – I’ve watched McDonald’s stock sit there like a forgotten Happy Meal for what feels like forever. While the broader market kept grinding higher, MCD just… didn’t want to play along. It’s been one of those names you almost forget you own, quietly collecting the dividend but never giving you that rush you get from the real movers.
That might be about to change.
One of the sharpest chart minds on Wall Street just put out a call that caught my attention: McDonald’s is setting up for a legitimate breakout – both on an absolute basis and relative to the S&P 500. And when this particular technician speaks, I listen.
Why McDonald’s Has Been Such a Dog
First, let’s not sugar-coat it. The last few years have been rough for the Golden Arches on a relative basis.
Since early 2022, the stock has basically gone sideways to down while the S&P 500 has ripped over 50% higher in spots. Inflation crushed margins for a while, labor costs spiked, and the consumer started pushing back on price hikes. Value menus came back, promotions got aggressive, and investors yawned.
Add in the whole E. coli scare earlier this year (remember the Quarter Pounder drama?) and you had a stock that felt toxic. It wasn’t hard to see why so many growth-oriented portfolios just rotated out and never looked back.
But markets have a funny way of punishing stocks too hard for too long. And that’s exactly what seems to have happened here.
The Absolute Chart Is Screaming “Base Complete”
If you pull up a weekly or monthly chart of MCD going back five or six years, something jumps out immediately: McDonald’s has spent the last three years building a massive multi-year base.
We’re talking a textbook consolidation pattern – higher lows since the 2022 bottom, with the stock repeatedly testing the $300 zone and getting rejected. Four times it tried to break out. Four times it failed and rolled over.
Fifth time’s the charm?
Right now the stock is once again pressing up against that overhead supply near $315–$320. Volume has been picking up on the advance – always a good sign – and momentum indicators are turning higher for the first time in ages.
Perhaps most encouraging: the 50-day moving average has crossed above the 200-day. Yeah, the golden cross happened a few weeks ago and the stock hasn’t looked back. In the past, when MCD has printed this signal inside a multi-year base, the follow-through has been excellent.
When you see a stock that’s been chopping sideways for years suddenly flash a golden cross with expanding volume, you have to pay attention. History says the odds of upside resolution are extremely high.
The Relative Chart Looks Even Better
Here’s where things get really interesting.
If you chart MCD divided by the S&P 500 (the relative strength line), you’ll see something that looks suspiciously like a triple-bottom going back to 2021. The ratio put in its final low earlier this year and has been grinding higher ever since – quietly, steadily, relentlessly.
That line is now breaking out to its best levels since 2021. Translation: McDonald’s is finally starting to outperform again.
In my experience, when a former market leader that’s been in hibernation for years suddenly flips the relative strength script like this, the catch-up trade can be fierce. We’ve seen it with names like Coca-Cola in 2018–2019, Procter & Gamble in 2020, even Walmart more recently. Big, boring, defensive growth compounds when it wakes up.
What Could Actually Drive the Move
Charts don’t move in a vacuum. So what fundamentals might support a sustained breakout?
- Menu innovation finally gaining traction – The “Best Burger” initiative, new McCrispy platform, and CosMc’s spin-off are all showing early promise.
- Digital & loyalty flywheel – Over 150 million active loyalty members now, driving higher check and frequency.
- International recovery – China same-store sales are turning positive again after a rough couple of years.
- Franchisee health – Record cash flows at the operator level mean more remodels and new units.
- Value perception improving – The $5 meal deal extension into 2025 has been a masterstroke for traffic.
None of these are revolutionary on their own. But taken together, they suggest the worst of the margin compression and traffic worries might be behind us.
Price Targets If the Breakout Holds
Measuring the base from the 2022 low around $230 to the $320 shelf gives you roughly a $90 range. Add that to the breakout point and you get an initial measured move toward $410. That’s about 35% upside from current levels.
Longer-term, if MCD simply returns to its old relative strength peak versus the S&P from 2021, you’re looking at closer to $450–$475 over the next 18–24 months. That would put the stock at new all-time highs for the first time since late 2021 – something many investors thought they’d never see again.
And remember, this is a company that grows the dividend every single year and currently yields north of 2.3%. You’re getting paid pretty nicely to wait for the move.
Risks? Of Course There Are Risks
Look, nothing is guaranteed. If we get another food-safety headline or inflation reaccelerates and crushes margins again, this whole setup could unravel. A broader market rotation away from risk-off names could also cap the upside.
But here’s the thing – the risk/reward right now looks about as good as it gets for a blue-chip name. The stock is sitting right on multi-year resistance with improving momentum and relative strength. Either it breaks out and runs, or it fails again and probably retests the $270–$280 zone – giving you a clearly defined risk of roughly 12–15%.
I know which side of that equation I’d rather be on.
How I’m Thinking About Positioning
Personally, I’ve been adding on strength above $310 with a stop below $290. If we clear $320 cleanly on volume, I’ll add again. The goal is to ride the meat of the move but stay disciplined if the pattern fails.
Some traders might prefer to buy the dip back to the 200-day if we get a pullback in the broader market. Others will wait for confirmation above $325. All are reasonable. The beauty of this setup is there are multiple ways to play it with defined risk.
Bottom line: after years of underperformance, McDonald’s finally looks like it wants to remind everyone why it spent decades as one of the best-performing stocks in the market.
Sometimes the biggest moves come from the names you least expect. And right now, the charts are screaming that Ronald McDonald might be ready to run.
This is not investment advice. Always do your own research and consider your personal risk tolerance before making any investment decision.
