McDonald's Corp. - MCD - close 74.37 change -1.71 stop 75.75

Company Description:
McDonald's Corporation franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, yet limited, value-priced menu in more than 100 countries worldwide. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements.

Target(s): 72.05, 70.90
Key Support/Resistance Areas: 75.35, 73.60, 71.50, 70.50
Time Frame: 1 week

Why We Like It:
MCD printed a new all-time high of $76.36 yesterday. The recent surge higher was due to the company reporting +7% y/y same store sales in early August. Today MCD reported that August same store sales were up only +4.9% y/y compared to the prior +7% gain. This wasn't good enough for investors as they began dumping the stock on heavy volume. I believe the selling will continue at least to a key support level near $72.00 which was prior resistance in May. I suggest readers initiate short positions to take advantage of the momentum and possible broader market pullback. The gap down today hasn't been filled but I don't think it will prior to breaking lower. Let's use a trigger of $74.60 or a breakdown to $73.55 to open positions. We'll use an initial tight stop of $75.75 which is below yesterday's high and get out early if we are wrong.

Suggested Position: Buy October $72.50 PUT, current ask $1.00

Annotated chart:

Entry on September xx
Earnings: 10/21/10 (unconfirmed)
Average Daily Volume: 6 million
Listed on September 9, 2010