McDonald’s Corporation (NYSE:MCD) announced that it is closing all outlets in Russia in compliance with sanctions against the aggressor. The news is difficult for a company that was already facing the pressure of people not eating out due to the rising inflation. Apart from inflation, people have been shifting away from fast foods to healthier homemade foods.
The battering for MCD includes another critical component; the rise in commodity prices, especially energy and wheat. The developments mean that MCD will be faced with rising costs of wheat and energy. This could have a downward pressure on revenues. The company cannot adjust its prices significantly since demand is highly elastic. In a nutshell, MCD is between a rock and a hard place.
McDonald’s baking downward momentum to $200
Source – TradingView
McDonald’s share price reflects the mentioned difficulties. A downward market run sustained for the last five weeks is just gaining momentum.
At the time of publishing this analysis, the price was at $222, just a few dollars above the support of $210. Analysis shows that the company is likely to test this support level and even find a lower level at $200 within the coming few weeks.
The RSI is at 31.12 and declining with more than 25 points divergence from the 14-day SMA. The MACD at -0.66 just crossed below the oscillator. Read together with the divergence from the histogram; the analysis shows that downward momentum is just building up.
Summary
We think that MCD will continue declining in the foreseeable future. The closure of Russian operations together with the shocks in the supply market for wheat, are two risks spelling doom for the company. MCD shares will slip below the current support of $210 to find new support at $200.
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