I’ve spent the greater part of 11 months ripping sell-side fundamental analysts to shreds on this site for their slavish dependence on discounted cash flow analysis. Today, I thought I thought it would be nice to visit with my old friend Elliot Wave, technical analyst extraordinaire, to ask some basic questions about how he sees the tape lately.
The Reformed Broker : What’s up, Elliot…how’s the market treating you?
Elliot Wave: I’m in an uptrend these days, buddy, can’t complain.
TRB: I was glancing at the chart of McDonalds recently and didn’t really come up with a compelling reason to buy or sell at these levels…
EW: MCD is consolidating at these levels…
TRB: Whoa whoa whoa…isn’t that what you technicians always say whenever you don’t really know or don’t feel like risking the direction call?
EW: OK, you got me, I’m busted. “Consolidating” is how we technicians say “Whatever”.
TRB: Then why not just say “I have no idea”?
EW: Because once the direction is established, I can be like “see, I told you it was consolidating before the breakout/ breakdown!” If I say “whatever”, then I’ve committed to missing the call.
TRB: Gotcha, very clever. So what’s the truth on MCD’s chart?
EW: Truthfully, it’s ok here I guess, but the stock will look great if it can break $90 to the upside.
TRB: You’ll like it at $90? But it’s in the low 60’s! How helpful can that be?
EW: The all-time high is like 65ish, so we can be pretty certain that there won’t be any resistance at 90. No natural sellers in the way.
TRB: Dude, 90 is like 50% higher from here! That’s were you’d be a buyer?
EW: Yup, that’s a textbook breakout.
TRB: So you’ll commit to liking it 30 points higher from here…
EW: Only on good volume, Josh, only on good volume.
TRB: OK, Elliot, thanks for the possibly, maybe actionable-in-the-future advice on MCD.
EW: You got it. My indicators are telling me I gotta hit the mens room. See you soon!
TRB: Later, Trader.