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Arcos Dorados Holdings, Inc. is an Argentina-based company engaged in the operation of McDonald’s franchisees. The Company serves over 4 million customers through the operation of 1,840 McDonald’s-branded restaurants in 20 Latin American countries, such as Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, French Guiana, Trinidad & Tobago, Mexico, Peru, Guadeloupe and Panama, among others.
To review Arcos’ stock, please take a look at the below with my added notations:
ARCO had been in an overall sideways move since May. During that time, the stock had held a clear level of support at $12 (red). Even though the market has caused most stocks to move higher over most of the last 6 months, ARCO had not been able to follow along and has recently broken below $12. This breakdown is both a new 52-week low and a break of a clearly defined support level.
The Tale of the Tape: ARCO had formed a key support level of $12, which was a 52-week low breakdown. This should signal lower prices ahead for the stock. A short trade could be entered on ARCO on a rally up to $12, with a stop set above that level. A break back above $12 would negate the forecast for a move lower and a long position could be considered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT