Multinationals, Revisiting MCD

Recently I've been talking a bit about the plunge in the Euro, specifically the $1.30 level and the likely selling that we may expect as $1.30 represents a psychological level of support for the Euro. We've seen some improvement in the Euro since the FX market opened this week, but it's still trading below $1.30. It's fairly normal, especially recently, for broken support to put up a fight for a bit before it gives up the ghost, the Euro-while the trend is clearly not good, hasn't given up the ghost quite yet. Perhaps later in the week with the auctions in Europe, we may see that unfold.

However, I'm not advocating trading the currency (do as you wish), I have been talking though about some bellwether stocks like MCD which was a featured trade on December 10th and is on the January trade list. Despite MCD being a low Beta trade of only .43, we have seen a nice trend develop there and the trade is currently in the green to the tune of about 5%.

You can see the call on December 10th was pretty timely as support was broken the next day. If you look at what happened after that over the next two weeks, you can see what I'm talking about above, when support is broken and the equity lingering in the area for awhile before giving up the ghost.

What is probably more interesting at this point are the 2011 themes I've been mentioning and one has been the weakness in the Euro, strength in the dollar and the equity classes that this trend will effect. Commodities has been one, but another (just mentioned KO last night) is the effect this will have on earnings for multinational companies like KO or MCD. The strengthening dollar will weaken foreign sales. MCD seems to be one of the first to show the profound effects -despite that super low beta.

I'll continue to bring you more trades like this and more emerging trends for 2011. If you are in MCD and need current stops (I just updated MCD on the January trade list), let me know what kind of trade you are pursuing-Trend, Swing, etc and I'll send you my Trend Channel's current stop. Thus far it looks like MCD is turning into the kind of trade I expect to see more of in 2011, at least as far as what we are seeing now-and that is trending trades that are orderly which are some of my favorite kinds of trades.