McDonald's may be setting up for a McBust.
That's according to Mark Newton, founder and president of Newton Advisors, who says the fast-food giant's impressive run this year may be coming to an end.
"The stock is showing a relative strength index of right near 80," Newton told CNBC's "Trading Nation" on Tuesday. "Historically, this has happened five times in the last 25 years, and on four of those five occasions, the stock has been sideways to down."
A stock's relative strength index, or RSI, measures its overbought or oversold conditions. A reading above 70 indicates shares have risen too far, too fast relative to their historical trading patterns. McDonald's currently trades with a weekly RSI of 79.9.
McDonald's is the best Dow performer this month, rising 4%. The stock has also climbed 23% this year, outperforming the Dow which is up 11%. MKM Partners jumped on board the stock Tuesday with a buy rating, joining 24 other analysts on the Street with a bullish call. The firm cited a belief that strong domestic and international sales growth is sustainable for the burger chain.
Newton said after that surge the stock is stretched and in need of consolidation.
"It's had a stellar run, it's doubled over the last four years, but the past in this case certainly does not equate to a bright future in the next couple years, so I would not put new money to work at current levels."
Quint Tatro, founder and president of Joule Financial, agrees that it may not be the best time to take a bite out of this burger right now either.
"You now have a company trading eight times sales, negative book value ... traditionally, this is a stock where it does not pay to chase at these levels fundamentally. The dividend is 2%, it's not all that great, you're going to get better yielding in some other areas," he said in the same "Trading Nation" segment.
Tatro said McDonald's is in a good position, but at risk of a downturn if rates make a reversal.
"It's not that we don't like the company, the brand, even in better environments, the fundamentals ... but they're getting the benefit of a low interest rate environment and if that turns, this stock is going to come down very quickly, I would not be a buyer here."
Disclosure: Joule Financial is long McDonald's.
