Watch These McDonald’s Price Levels as Stock Drops on E. Coli Investigation

Shares in McDonald’s (MCD) slumped 6% in extended trading on Tuesday after health authorities said they were investigating an E. coli outbreak possibly linked to the fast-food chain’s Quarter Pounder burgers.

The Centers for Disease Control and Prevention (CDC) said that 49 cases of E. coli infection had been reported across 10 states, prompting McDonald’s to temporarily remove the popular burger and suspend the distribution of slivered onions from restaurants in those jurisdictions.

Quarter Pounder hamburgers are a staple on the restaurant’s menu, generating billions in revenue each year. Prior to Tuesday’s post-market drop, McDonald’s stock had gained around 24% over the past three months, boosted by confidence that the company’s $5 value meal launched in June could translate into sales growth.

Below, we analyze the technicals on the McDonald’s chart and identify important price levels to watch out for.

Prior Trading Range in Focus

McDonald’s shares oscillated within an orderly 16-month trading range before breaking out above the pattern late last month.

In an encouraging sign for the bulls, increasing volume has backed the stock’s recent move higher. Moreover, the 50-day moving average (MA) crossed above the 200-day MA in September to form a golden cross, a bullish chart signal pointing to higher prices.

However, given the projected news-driven drop, the stock may retest the prior trading range before potentially continuing its longer-term uptrend. Let’s look at three important retracement levels on the McDonald’s chart and forecast a bullish price target.

Key Retracement Levels to Watch

The first lower level to monitor sits around $300, just above where the stock finished the after-hours trading session Tuesday. This location on the chart finds a confluence of support from the 50-day MA and the trading range’s top trendline, which may flip from an area of prior resistance into a floor of future support.

Bulls’ failure to defend this level could see a fall to the $280 region, where the shares may attract buying interest near a trendline linking multiple peaks and troughs on the chart between November 2022 and April this year. This location also sits in close proximity to the upward sloping 200-day MA.

A steeper drop could lead to the stock revisiting lower support at $260, an area where investors may seek out buying opportunities near a horizontal line connecting a range a comparable trading levels on the chart from late 2022 to July this year.

Bullish Price Target to Monitor

To forecast a potential price target on the McDonald’s chart, we can use the measuring principle.

To do this, we calculate the distance between the trading range’s two trendlines in points and add that amount to the breakout area. For instance, we add $53 to $300, which projects a bullish target of $353, an area where investors may look to bank profits.

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As of the date this article was written, the author does not own any of the above securities.