Potential Breakouts Ahead for McDonald's, Restaurant Brands International, and Yum! Brands

Restaurant Stocks Show Strength with McDonald's, Restaurant Brands, and Yum! Brands Poised for Breakouts Amid Sector Analysis

By Bill Bullington

3/6, 13:09 EST
Eli Lilly and Company
Meta Platforms, Inc.
NVIDIA Corporation
Rivian Automotive, Inc.
SolarEdge Technologies, Inc.

Key Takeaway

  • McDonald's (MCD), Restaurant Brands International (QSR), and Yum! Brands (YUM) show bullish patterns, indicating potential breakouts.
  • Despite a market decline, 45 of XLY's 54 components outperformed, highlighting strength in the consumer discretionary sector.
  • Historical momentum trends suggest significant price appreciation following breakout patterns in restaurant stocks.

Sector Performance Analysis

On Tuesday, the stock market experienced a significant decline, prompting investors to analyze the sectors that outperformed for potential future investment ideas. The Consumer Discretionary Select SPDR fund (XLY) lost 1.2%, with two stocks, Tesla and Amazon, accounting for 1.06% of that decline. However, it is essential to note that 45 of XLY's 54 components outperformed the ETF, indicating relative strength in the sector.

Restaurant Stocks Technical Analysis

Within the consumer discretionary space, restaurant stocks showed relative strength on Tuesday, with several stocks displaying constructive technical formations. McDonald's (MCD) has formed a bullish inverse-head-and-shoulders pattern, with a breakout above the $300 zone potentially targeting $355. Similarly, Restaurant Brands International (QSR) and Yum! Brands (YUM) are also showing bullish patterns, with potential breakout levels identified for significant upside.

Historical Patterns and Momentum

Historical data suggests that when stocks break through multi-year resistance levels, they can experience significant momentum and price appreciation. Past instances of stocks like Wingstop (WING) and Texas Roadhouse (TXRH) breaking out from similar formations resulted in substantial price increases. While this is not a guarantee of future performance, it highlights the potential for momentum to drive stock prices higher.

Street Views

  • Frank Cappelleri, Founder of Cappthesis.com (Bullish on McDonald's (MCD), Restaurant Brands International (QSR), and Yum! Brands (YUM)):

    "McDonalds (MCD) has had a wild ride over the last 10 months and now sits at the same price level that it was trading at last April — eleven months ago... A breakout back above the $300 zone would target $355." "On the weekly chart, Restaurant Brands International (QSR) looks very similar to MCD, having formed its own inverse-head-and-shoulders formation over the last year. In fact, QSR is even closer to a potential breakout attempt. A move through the $80 zone would prompt an upside objective near $98." "Longer-term, Yum! Brands (YUM) has been forming a potential bullish cup-and-handle pattern since topping in November 2021... It could be getting ready to do so again now."