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Longs Choking on McDonald’s, Now What?


Hard as it may be to believe, McDonald’s is currently among the worst performing Dow stocks for 2012? How’s that even possible?

If there was a stock that was supposed to be able to weather almost any storm, it was McDonald’s, wasn't it?

It wasn’t long ago that the pros were lauding the management team and crowing about the company’s ability to grow sales despite economic headwinds.

Well, no more.  “This is a momentum stock that’s out of momentum,” muses top trader Steve Grasso, director of institutional sales trading at Stuart Frankel.

Part of the problem is that the latest same-store sales data was flat. It’s the worst performance by McDonald’s in more than nine years. No growth is no good.

“Another problem for McDonald’s is the recent ,” adds trader Jon Najarian, founder of optionMOnster.com. “The Street fears McDonald's is facing mucher higher input costs that they can't pass along."

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"Also, Wall Street is turning a cold shoulder because if Europe falls into recession, McDonad's seems vulnerable," adds Joe Terranova, chief market strategist for Virtus.

Europe edges out the US as the company’s top market for sales.  And the recent results in France and Germany - two top European markets for McDonald's - were weak. In addition, McDonald’s called out concerns about "several Southern European markets amidst an increasingly difficult environment."

“I would now sell into strength,” adds trader Joe Terranova.

If you have an appetite for risk, you may be thinking about buying the pullback. If that's you, the pros say in the low 80’s the stock becomes very attractive but they also say wait until it levels off before pulling the trigger. It’s entirely possible the stock overshoots to the downside.

* You can find our conversation about McDonald's about 2:30 into the video clip above.

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 8, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long USB; Joe Terranova is long GS; Joe Terranova is long JPM; Joe Terranova is long YHOO; Joe Terranova is long SBUX; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long NXPI; Joe Terranova is long EMC; Steve Grasso is long HPQ; Steve Grasso is long MU; Steve Grasso is long DD; Steve Grasso is long ZNGA; Steve Grasso is long MSFT; Anthony Scaramucci is long AAPL; Anthony Scaramucci is long C; Anthony Scaramucci is long JPM; Anthony Scaramucci is long GS; Anthony Scaramucci is long WMT; Jon Najarian is long call spreads in GMCR; Jon Najarian is long call spreads in OCN; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in YELP; Jon Najarian is long call spreads in MON; Jon Najarian is long put spreads in HPQ; Jon Najarian is long put spreads in KCG; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long CIGX; Jon Najarian is long GLUU

For Dennis Gartman
Dennis Gartman is long Gold in yen Terms

For Toni Sacconaghi
Bernstein currently makes a market in the following companies AAPL
Toni Sacconaghi maintains a long position in Seagate Technology STX

CNBC.com with wires.