Restaurant stocks are on fire this year, but McDonald’s has gotten left in the dust.
Shares of the world’s largest fast food company are down nearly 8 percent since January, compared with a more than 26 percent gain in the same time period last year.
According to Carter Worth, head of technical analysis at Cornerstone Macro, there’s something in the charts suggesting more pain for the Dow component when it reports earnings later this week.
Worth noted that while shares of McDonald’s have been underperforming this year, they have been on a torrid run over the last three decades, more than tripling the performance of the Nasdaq composite.
In the past year, McDonald’s has risen only 3 percent compared with the Nasdaq and broader S&P 500, which have gained 23 percent and nearly 15 percent, respectively.
“The issue is of late [McDonald’s is] very toppy and starting to stall.” Worth said Friday on CNBC’s “Options Action.” So the great winner long term is now the one that’s losing and that’s a sign I think of exhaustion.”
Despite seeing gains of nearly 64 percent in the last five years, Worth’s charting reveals a number a bearish technical indicators signaling shares of McDonald’s are now “coming down to trend” around the $140 level.
Worth first illustrates a head-and-shoulders top formation, suggesting the stock’s longer-term upward momentum is now gearing up for a reversal. Additionally, Worth noted the stock’s recent consolidation pattern as an additional indicator of a “pretty good sell-off” looming.
“Some might say [McDonald’s is] going to break out,” he said. “That’s a bet I would not make. I think it’s going to break down.”
McDonald’s is scheduled to report second-quarter earnings before the bell on Thursday. The stock was trading slightly higher Monday afternoon, around $158.40.